Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

CCLAF.PK ASX: CCL - Coca-Cola Amatil Limited

|Includes: Coca-Cola Amatil Ltd. (CCLAF)

Coca-Cola Amatil Limited (ASX:CCL) is one of the largest bottlers of non-alcoholic ready-to-drink beverages in the Asia-Pacific region and one of the world's top five Coca-Cola bottlers. Coca-Cola Amatil employs more than 15,000 people and has access to more than 265 million consumers through over 700,000 active customers.

Coca-Cola Amatil has operations in five countries - Australia, New Zealand, Fiji, Indonesia and Papua New Guinea. Coca-Cola Amatil sells and distributes a diversified product portfolio including carbonated soft drinks, water, sports and energy drinks, fruit juice, flavored milk, coffee and packaged ready-to-eat fruit and vegetable products.

Coca-Cola Amatil also sells and distributes the premium spirits portfolio of Beam Global Spirits & Wines which include products such as Jim Beam, Canadian Club and Makers Mark.

Coca-Cola Amatil's major shareholder is The Coca-Cola Company which owns 30% of Coca-Cola Amatil.

Does this business have a sustainable competitive advantage?

Coca-Cola Amatil's has the advantage via their licence of distributing and selling world leading brands such as Coca-Cola, diet Coke, Coke Zero , Fanta , Sprite, Powerade and Pump.

Coca-Cola Amatil distributes and sells other brands including Mount Franklin, Deep Spring and Kirks.

The company also sells the premium spirits portfolio of Beam Global Spirits & Wines including Jim Beam, Canadian Club and Makers Mark.

Coca-Cola Amatil enjoys an economy of scale in logistics and distribution of their product range.

Where is the opportunity for this business?

Coca-Cola Amatil has a massive opportunity to grow their business due to their licence to distribute their brands in Indonesia. Indonesia's population is 231 million people with a rapidly growing middle class. Current consumption of 8oz drinks in Indonesia is a fraction of that consumed per capita in Australia. So, Indonesia represents an enormous growth market for Coca-Cola Amatil on the basis of population, growing affluence and consumption increases per capita.

Coca-Cola has made a significant investment in distribution infrastructure in Indonesia. As of December 2010, the business reported that it had:

35 Production lines

96 Warehouses

7,609 Employees

199,000 Coolers

Coca-Cola Amatil reported at the same time that they had just 485,000 customers. With over 230 million Indonesian customers still to not drink one of their products, it is easy to see the opportunity the company has to grow.

What are the risks facing this business?

The risk to the business is that the mature markets in Australia and New Zealand do not provide growth to the company. The risk of not growing is potentially compounded if the business does not control its costs in these two countries.

The business is run with a lot of debt which always places the business at risk particularly in a weak economic environment.

Is it run by able and trustworthy management?

Coca-Cola Amatil have a strong management team and their CEO Terry Davis has been with the company since November 01. I have seen Terry Davis interviewed a couple of times and I like the calm business approach he seems to take.

Management have run the business with high debt levels in recent years with Net/Debt to Equity being a touch over 80% for the 2011 financial year.

Is it trading at a bargain price?

Rank 2010 Actual Valuation 2011 Actual Valuation Today's Share Price Margin of Safety 2012 Forecast Valuation 2013 Forecast Valuation 2014 Forecast Valuation
Bronze 1 $8.94 $7.64 $12.55 -53.61% $8.17 $8.34 $7.27

Summary

In summary, Coca-Cola Amatil is a profitable business with a huge brand name and experienced management. The company enjoys good cash flow however it does have a lot of debt. The company's share price is expensive at the moment on my metrics but it does have a significant growth opportunity in front of it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.