Event:
The company’s second biggest shareholder ABI announced today that it would transfer 19.9% equity stakes to Asahi Beer. According to the contract, ABI is to transfer 261.5778mn H-shares with a premium of 38% at HKD19.78 per share, which is 14.2x of EBITDA08. (Please refer to appendix at page 3 for details).
Our Analysis and Estimation:
According to the announcement issued, the company is to transfer USD667mn, i.e. 14.2x of EBITDA08 totally with EBITDA at USD1.39 per share. Reviewing its performance of the first three quarters in 2008, turnover of main businesses in Q3 increased by 21% yoy, which reversed the sluggish performance of 9% of the previous quarter. As a result, business turnover, total profit and net profit attributable to parent all enjoyed year-on-year increase under the condition that periodic expenses remain unchanged, and negative growth trend in Q2 2008 was totally reversed. We project that performance of the company in Q4 2008 will still maintain slight increase despite of the negative growth in December 2008.
High premium purchase reappears, and both sides hold different viewpoints to their operation. On one hand, ABI will be able to return the USD45bn debt which generated from AB acquisition, and on the other, Asahi Beer will continue to expand its overseas market, and it is possibly to take advantage of the sales network of Tsingtao Brewery to expand its brewery business in short term.
We hold the view that the company is the most potential long-term investing A-share company of food & beverage industry because of: 1) its brand-oriented strategy; 2) its development strategy; 3) its organization structure, and 4) its mid-long term influence like operational management, which is also a key factor for our optimistic attitude.
Investment Suggestion:
According to our calculation, the company’s EPS in 2008-2010E is predicted at Rmb0.55, Rmb0.68 and Rmb0.80 respectively, and year-on-year increase of 2009 at ~23%, thus “Recommended” rating is hereby given. As for the whole industry, we hereby repeat our viewpoint in report of Brewery Industry: Inflexion to Turn up in 2008 which issued on January 1, 2008 that 2008 is the first year for direct price hike in history; meanwhile we hold the view that brewery industry will be comparatively well performed among all sub-sectors of food & beverage industry.