May 20, 2024 13:51 GMT
Molson Coors (TAP; Baa2 Pos/BBB S) FV
CONSUMER STAPLES
€benchmark 8Y FV: MS+90
- Molson Coors should price wide of all brewers for its smaller scale (on par with Carlsberg), lack of geographical diversification (80% in Americas, no other brewer is as poorly diversified), weaker volume growth in recent years & mid-pack margins with little progress - though its move towards premium may help that heading forward. This is somewhat captured in ratings (lowest) but BS is well into upgrade territory (Baa1) at Moody's - it could move on the firm 1Q results.
- Existing 24s gave a sizeable discount vs. Carlsberg (Baa1/NR/BBB+) (below) but BS was much higher levered post the '16 acquisition of MillerCools - it was Baa3/BBB- which was one notch lower at Moody's vs. CARLB (till latter's upgrade this year). Net we think current co's exposure & BS should give 10bps over CARLB curve that trades in-line with (New Asahi) & Heineken 8Y/32s at Z+80.
- Re. the equity px action post Q1 results and ensuing analyst debates; we don't think credit needs to care (for now). If FY guidance gets revised up its likely dividends will be scaled up with it and vice versa - i.e. beta to earnings revisions is low for us here.
- On future brewer supply; AB-Inbev & Asahi have already come this year. Heineken, Carlsberg & Diageo all have ~€1b in local maturities coming up and makes them likely next candidates.
As a aside we don't view the sector as cheap. It may have found a bid for its staple nature but there is nearly rating free spread pickup of 70bps into BAT & 30bps into H&M (on 8Y). See our retailers note from last week for more on H&M.
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