SABMiller plc (SAB): Buy, Sell Or Hold?

Page 1 of 2

LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

Right now I am trawling through the FTSE 100 (UKX) and giving my verdict on every member of the blue-chip index.

I hope to pinpoint the very best buying opportunities in today’s uncertain market, as well as highlight those shares I think you should hold … and those I think you should sell!

SABMiller plcI’m assessing every share on five different measures. Here’s what I’m looking for in each company:

Financial strength: low levels of debt and other liabilities;
Profitability: consistent earnings and high profit margins;
Management: competent executives creating shareholder value;
Long-term prospects: a solid competitive position and respectable growth prospects, and;
Valuation: an underrated share price.

A look at SABMiller

Today I’m evaluating SABMiller plc (LON:SAB), a South African brewing company, which currently trades at 3,430 pence. Here are my thoughts.

1. Financial strength: SABMiller is in a solid financial position, with cash and cash equivalents of more than 600 million pounds in the balance sheet and interest payments covered by operating profits a comfortable 7 times. Net debt has increased from 5 billion in 2008 to 11 billion in 2012, but this is backed by stable free cash flows, averaging more than 1 billion per year over the past three years.

2. Profitability: Total revenues have compounded by 12% annually over the past 10 years, with earnings per share and dividends per share growing by 16% and 15% per year, respectively. Operating margins have expanded from 9.7% in 2003 to around 20% the past few years, and return on equity has averaged a solid 13% over the past decade.

3. Management: Under Graham Mackay’s watch, SABMiller plc (LON:SAB) has become the second largest brewer in the world. He spearheaded the company’s growth through a total of 34 acquisitions and aggressive expansion in growing markets. In the 13 years under his watch, revenues have grown from 200 million in 1999 to 2.2 billion in 2012.

4. Long-term prospects: SABMiller plc (LON:SAB) is one of the world’s leading brewers, with operations across six regions in 75 countries, employing 70,000 people, and owning a portfolio of more than 200 leading beer brands, which include Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft, and Grolsch.

The group has leading positions in both emerging and developed markets where it is either the No. 1 or No. 2 brewer in 90% of these regions. It has built a strong presence in fast-growing markets in Latin America, China, India, and Central and Eastern Europe, which now account for 76% of the group’s EBITDA. With per capita consumption in these countries expected to increase in the coming years, the group is poised to benefit from this growth. The group also continues to make key acquisitions and expand its global footprint, recently acquiring Foster’s in Australia, giving it a leading position in that country’s profitable and growing beer market.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!