Current Price: ~ $45/share

Projected Yield: ~ 2.91%

Molson Coors is one of the largest brewers in the world. Major brands include Coors Light, Molson Canadian, Carling, Miller Lite, Keystone, Blue Moon and Leinenkugel's. Its largest markets include Canada, the United States, and the United Kingdom. Molson Coors retains 40% share of the Canadian beer market, 29% of the U.S. beer market (via its MillerCoors joint venture with SABMiller), and 19% of the U.K. beer market.

Estimated WACC for the firm today is 7.82% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year | FCF $Millions |

2002 | 19 |

2003 | 304 |

2004 | 288 |

2005 | 16 |

2006 | 387 |

2007 | 188 |

2008 | 181 |

2009 | 700 |

2010 | 572 |

2011 | 633 |

CAGR FCF ex-2002: ~ 10%

Consensus Forecast Industry 5-Year Growth: ~ 13% per year

Consensus Forecast Company 5-Year Growth: ~ 7% per year

Internal Growth Rate: ~ 4%

Sustainable Growth Rate: ~ 6%

**Scenario 1**

- Start at $633 million FCF
- Assume a 5-year growth rate in FCF of 7% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year | FCF $Millions |

0 | 633 |

1 | 677 |

2 | 725 |

3 | 775 |

4 | 830 |

5 | 888 |

Terminal Value | 12143 |

The firm's future cash flows, discounted at a WACC of 7.82%, give a present value for the entire firm (Debt + Equity) of $11426 million. If the firm's fair value of debt is estimated at $2178 million, then the fair value of the firm's equity could be $9248 million. $9248 million / 181 million outstanding shares is approximately $51 per share and a 20% margin of safety is $41/share.

**Scenario 2**

All else being equal,

- Assume a 5-year growth rate in FCF of 7% per year, then 1% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year | FCF $Millions |

0 | 633 |

1 | 677 |

2 | 725 |

3 | 775 |

4 | 830 |

5 | 888 |

Terminal Value | 13923 |

- Present Value of the entire firm (Debt + Equity): $12647 million
- Value of Equity: $10469 million or $58/share
- 20% margin of safety is $46/share

**Scenario 3**

All else being equal,

- Discount the firm's future FCFs at 9%
- Assume a 5-year growth rate in FCF of 7% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year | FCF $Millions |

0 | 633 |

1 | 677 |

2 | 725 |

3 | 775 |

4 | 830 |

5 | 888 |

Terminal Value | 10555 |

- Present Value of the entire firm (Debt + Equity): $9855 million
- Value of Equity: $7677 million or $42/share
- 20% margin of safety is $34/share

Sources

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