founded: 1852, NYSE code: BUD, homepage: www.anheuser-busch.com

Overview
Anheuser-Busch is the leading manufacturer of products for beer loving part of American alcohol consumer market. It either wholly owns, has a significant interest or exclusive importing rights for such beer brands as Budweiser, Bud Light and Corona together with European bestsellers such as Stella Artois, Beck’s, Bass Pale Ale, Grolsch and Asian top performers such as Tiger Beer or Harbin Lager.

In 2006 the brands of Anheuser-Busch stable seized about 49% of the overall American beer market shipping about 102 million barrels ie. more than twice the amount of its closest US competition. Anheuser-Busch is also a major player in the field of international beer markets – in 2006 international subsidiaries represented about 32% of the company’s total net income.

Analysis of December 2006 financial results:

• Market Cap: Depending on the daily prices of the company’s stock the total market capitalization is around US$42 billion over 777 million of issued shares
• Shareholders Equity: US$3.9 billion making the stock’s book value approx. US$5.10 per share (7.81% growth on FY 2005)
• Earnings per share: US$2.53 making the average EPS growth in last 5 years about 6.6%
• Return on Equity: 50%, averaging around 61.9%pa in last 5 years
• Balance Sheet: Negative working capital of US$-416.6 million (ie. US$ -0.54 per share) versus long term debt of US$7.7 billion

Sharemaket’s valuation:
Average BUD’s Price to Earnings ratio of 19.5 suggests the share price around US$49.3 (US$2.53 EPS x 19.5 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 7%
• Share price in 10 years time: about US$97 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years time: US$112 (share price of US$97 plus US$15 of the 10 years worth of dividends if the current payout ratio of about 40% persists)
• Rate of Return in next 10 years based on the mid December 2007 price of US$53.4 per share: 7.7%pa

Pros and cons:
+++ Traditional, very strongly positioned market leader of the alcoholic beverages industry
+++ Year after year showings of almost too good to be true ROE ratios
+++ Regular executions of stock buy back program is decreasing the number of outstanding shares and hence increasing the stock value
— Negative short term cash position as reported by the latest balance sheet

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This entry was posted on Tuesday, December 25th, 2007 at 8:36 pm and is filed under US Stock. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.