1. Pair Trade: Long P. Ricard - Short Heineken
Tuesday, October 16th 2012
Companies Description Investment Case
Pernod Ricard (RI FP) has probably one of the highest growth po-
tential in European staples sector, thanks to its geographic footprint.
Nearly 1/3 of its revenues are derived from Asia. The Asia/ROW
region that the company reports (40% of total revenues) grew for a
second year running at a double-digit growth rate. This is not only
China and India, but also includes mature markets such as Japan and
Australia. A key advantage of Spirits versus other Staples is the abil-
Market Price Data
ity to drive margin expansion. Last FY, Pernod Ricard’s EBITDA
Pernod Ricard (RI FP)
margin increased, even after considering a small hike in marketing
Last Price (€) 88.17 spending.
YTD Change 23.04%
Mkt Cap (€ bn) 23.392 The current gearing of c4x Net Debt/EBITDA should prevent the
Heineken (HEIA NA) company from being a part of any major acquisition for the foresee-
able future. Pernod Ricard´s earnings are sensitive to the US$/€ ex-
Last Price (€) 48.85
change rate given that c20% of group operating profit is from the US.
YTD Change 36.55%
Mkt Cap (€ bn) 28.135 Heineken (HEIA NA) is still having adverse mix trends in Europe.
Source: Bloomberg Nonetheless, Volume and Pricing seems to be improving. Cost bene-
fits have been able to offset higher input cost inflation.
Analysts Recommendations:
Acquiring Asia Pacific Breweries increases Heineken’s exposure to
“growth markets”. It seems to have been decisive for the recent re-
rating. However, an improvement in European macro-economic en-
vironment will probably be needed for the company to increase its
organic profit growth. Its short-term outlook could continue to be
challenged by weaker trends in Europe, higher COGS and upfront
costs for the new cost cutting program.
Source: Bloomberg The Pernod Ricard (RI FP) / Heineken (HEIA NA) ratio current
Market Multiples value is 1.805. We’ll define as our target ratio 1.92 and as stop-loss
ratio 1.75.
P/EEPS DY
2013
2011/13 2013 Net Debt/ Technical Comment
EBITDA
Est. CAGR Est. Est. Est. 2012
PR (*) 16.88 12.33% 2.02% 3.87
Heineken 15.06 9.47% 2.02% 1.99
(*) FY ends in June
Source: Bloomberg
Next Report Date
Q1 IMS and FY October
Pernod Ricard Guidance 25th
Q3 - Trading October
Heineken Update 24th
Source: Bloomberg
www.fincor.pt
www.facebook.com/Fincor
Announcement: Fincor—Sociedade Corretora, S.A. provides services of reception, execution, and transmission of orders. The contents men-
tioned in this document do not constitute (nor should they be interpreted as to form) any kind of counselling, or investment recommendation, or a
record of our trading prices, or an offer or solicitation to trade in any financial instrument. Fincor—Sociedade Corretora, S.A. Will not accept any
responsibility resulting from any use referring to said content or about any resulting effect that could have occurred.