Stock price: p1790 ($29.22 USD)
Conclusion: Trading update for Q3 leads us to maintain our estimates and valuation unchanged (p1800-p1900). Stock looks fairly priced.
Trading update Q3: lager volumes stable (down 1% first nine months)
SAB Miller’s (SBMRY.PK) stable volumes result from a mixed bag: growth in emerging markets, Latin America (+4%), Africa except SA (+7%) and Asia (+5%) offset by decline in developed markets (Europe -2%, US -3.6%) and in South Africa (-4%).
These numbers confirm that the industry continues to struggle with depressed volumes in mature markets. However, top line growth is not what investors in the beer sector are currently looking for. Future EPS growth in the industry will be driven by costs savings programmes coupled with synergies from consolidation. As to SAB Miller, margins will be enhanced thanks to the implementation of a new restructuring programme ($300m savings by 2014+$350m working capital release) combined with the synergies related to the MillerCoors integration.
SAB Miller trades at 16.2x P/E based on 2010, implying 10% premium to the sector. Our DCF points to the high end of our valuation range (p1800-p1900). We see more upside left for Heineken (HINKF.PK) and ABInbev.
Disclosure: No position