Update AmBev (ABV)
On March 4 AmBev (ABV) reported fourth quarter earnings before interest, taxes, depreciation, and amortization grew by 9.1% from the fourth quarter of 2008. Total net sales increased by 13.9% from the year-earlier period on an 11.6% increase in volume in Brazil.
Results were weaker in Canada (volume fell by 5.6%) and the rest of Latin America (volume fell by 2.8%).
The company’s board of directors announced a dividend payment and distribution of interest on capital on April 1 to shareholders of the New York Stock Exchange traded ADR as of March 23. The company had capped dividend distribution in 2009 in order to repay debt.
Absent a big acquisition it’s likely that the cap will be removed in 2010. In 2008 Brazilian shares that underlie the ADR paid a yield of 4.6%. That dropped to 3.3% last year. Itau Securities projects that the yield could climb to 4.7% in 2010.
As of March 11, I’m leaving my target price at $118 by October 2010.
Full disclosure: I own shares of AmBev in my personal portfolio.
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Jim,
I agree. The market reaction to the weaker results in Canada and Argentina was WAY overblown. Better sales in Brazil more than covered for the losses elsewhere, and with Brazil’s economy growing, THAT should be where the sales do increase. I’m holding on to my shares too, and I might even increase my holdings on this one.
Couple of days ago, I read that they were bound to buy the #1 brewer in Mexico before end of this year, which would definitely be a big acquisition.
Somebody in the market likes Jim. As soon as he posts this, ABV starts rising.
Ed, with a P/E at around 95 this does not appear to be a stock you would touch? I understand there are numerous factors that go into your decisions but it seems like you have some hard stances on several of these factors. Is P/E not important to you?
taterbug,
P/E is a guideline, not a rule. I prefer the PEG to the P/E. A stock can always grow into a reasonable P/E.
Admittedly, the PEG is a little high for ABV (1.23 last I checked), but when you throw in the fact they pay a dividend, it evens out.
In a secular bull market, I wouldn’t touch ABV. In a secular bear market, dividends should be given greater weighting in the consideration to buy or not.
Mind you, this doesn’t even touch on the fact that it has “Jubak’s Seal of Approval”. That’s a powerful blessing on a borderline stock.
We all need to do what we can to get ABV stock price up. I’m drinking LaBatts on a regular basis. ABV has many beer brand choices. If you don’t drink an ABV brand, consider switching. Stella is also a good choice.
Speaking of dividends, I bought a nice little junk bond fund at a discount: Credit Suisse High Yield Bond Fund (DHY). Get a 10+% annual DY (paid monthly) at a discount to NAV? I’m sold.
Needless to say, Morningstar does rate it as “above average” for risk, so be warned. Not for the faint of heart, and not for a lot of money.
I liked it better around $92-93..but their #’s look good otherwise…..not a too bad a entry point or time to add shares.
Tater, where did you see that they have a P/E of 95?
MSN/money
Personally, based on Jim’s information, I purchased AB Inbev, the Belgian mother company, which also enjoys a strong position in China, pays 1.3% dividend in 2010, and has a PE of 15.5 (respectively 1.77% and 13.6 foreseen in 2011).
Regarding ntack5 suggestion, they have sold a beer that I enjoyed, Qingdao, after taking over Busch, can therefore not contribute to the collective effort.
Ed,
why DHY as opposed to JNK? JNK trades more shares and has higher yield. I know that it currently is trading at a small premium to NAV but that seems like a small price to pay.
Tater,
Help me out…..I’m seeing ABV with a P/E of 18 and a Forward P/E of 13.47….both of which look good. I’m not seeing the 95.
BenWobbles,
DHY is a CEF, whereas JNK is an ETF. Where DHY holds the actual junk bonds, JNK merely invests to track their performance. Truth be told, I’m not exactly sure how JNK actually does that. Also, JNK’s DY is only about 1% more.
Jim:
Thanks for another timely update.
Ed,
JNK is the index fund of junk bonds. It does this the same way a stock index fund works….It contains some of the same holdings as the target index, similarly weighted.
catengineer,
Thanks.
Always willing to help out a fellow Southern Gentelman.
Also, I’ll echo Ed’s comments about DHY in relation to JNK. When you buy that ETF, you’re buying debt of companies with lower credit ratings so be aware!!
Cat- Here’s my link?
http://moneycentral.msn.com/detail/stock_quote?symbol=abv
T bug,
This in very interestring…because I got my numbers from the link below….I wonder which one is accurate???
http://moneycentral.msn.com/companyreport?symbol=ABV
Ed… Morningstar shows DHY at a 5.5% premium now. Something changed besides the price going up?
Run26.2,
That’s odd. When I looked at it this morning, Morningstar showed DHY at a discount. What screen are you looking at?
appologize if this is a double post… first one disappeared.
Ed… here is link to morningstar quote:
http://quote.morningstar.com/cef/f.aspx?t=dhy
the PE for ABV is much closer to that 18 number. PE can be calculated as current stock price divided by a full year’s EPS. ABV’s 2009 EPS was R$9.71 (in the Brazilian Real). Converted to USD at the average exchange rate for 2009 (.50827) we get a USD EPS of $4.935. Current price ($97) divided by 2009 EPS (4.935) gets us a PE of 19.7. Can’t figure out where the 95 would come from.
SEC document with 2009 EPS found here:
http://www.sec.gov/Archives/edgar/data/1113172/000114420410011387/v176259_6k.htm
taterbug,
the peg is next years earnings I like to use cnbc.com or yahoo.com to add up the past and the future earnings. msn money don’t have a very good earnings detail nor scottrade
Jim had posted a thing on peg back a while ago or use http://www.investopedia.com/terms/p/pegratio.asp
Hey folks isn’t ambev the company that bought Budweiser?
no, Bud was bought by Imbev… tootally different ;o)
Everyone have a beer tonight…my treat.
Run26.2,
Check this out. Different page on Morningstar, different story on DHY’s premium/discount:
http://quicktake.morningstar.com/cefnet/totalreturns.aspx?symbol=DHY&country=USA
Remind me to manually calculate it next time.
gusspresso24, beg to differ.
Bud was bought by the holding company, as stated in my post above.
yep, you’re completely right georic. We were actually talking about the same place, I just typed it wrong. Inbev, not Imbev… and now after the addition of Anheuser-Busch, it’s AB Inbev. Still, it’s a seperate company from ABV to answer Ripper’s question. AB InBev (ABI) is a Belgium-based company, while Ambev (ABV) is Brazilian based.
Drink more beer!
Jeez – we losing ourselves here…. Why don’t you all exchange each others email and chat away!