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San Miguel: “buy“ ratings reccomended

San Miguel Corp. (SMC) shares earned “buy“ ratings from three securities firms following its recent disclosure of an excellent year in 2001 as the company demonstrated the ability to establish and d…

San Miguel Corp. (SMC) shares earned “buy“ ratings from three securities firms following its recent disclosure of an excellent year in 2001 as the company demonstrated the ability to establish and deliver a solid business platform for the entire group, with a very strong potential for further growth. Giving the favourable recommendation on SMC were stockbrokers ATR King Eng, J.P. Morgan and UBS Warburg. The San Miguel Group posted consolidated net sales last year of PHP 122 billion, up 48% over PHP 82.3 billion in 2000. Revenue grew across all businesses: 48% in beverage, 90% in the food group and 1% in packaging. Operating income reached PHP 10.5 billion, 32% higher than the PHP 7.9 billion the previous year. Consolidated net income without the acquisitions of Coca-Cola Bottlers Philippines, Inc. (CCBPI) and Pure Foods Corp. would have reached PHP 7.3 billion, up 7% from last year. But due to the short-term dilutive effects of the SMC“s acquisition of CCBPI, net income amounted to PHP 6.5 billion against P6.8 billion in 2000. Maintaining a “buy“ recommendation on San Miguel, ATR Kim Eng Securities said it expects improved performance from the group this year due to the full year“s contributions from the businesses San Miguel acquired last year. With the recent investment of Kirin Brewery Co. Ltd. in SMC and the resulting savings, it forecast 2002 recurring net income to reach PHP 8.5 billion. Other brokers estimated that SMC“s earnings would reach between PHP 7.51 billion and P9.32 billion in 2002. J.P. Morgan, in giving another “buy“ recommendation for San Miguel, says it believes that the benefits of the company“s acquisitions will start to flow through towards the end of 2002. SMC will show margin improvements this year, it added, noting likewise that the CCBPI acquisition will be dilutive only in the short term. Securities firm UBS Warburg which also rated SMC shares a “buy“, believes investors will remain keen on SMC given the company“s gearing, domestic restructuring efforts and merger and acquisition opportunities overseas. SMC can improve its earnings outlook by acquiring cheaper assets in the region that would keep its long-term growth high. It sees San Miguel earnings this year at PHP 7.61 billion. Separately, Salomon Smith Barney maintained an outperform rating on SMC, viewing the company“s acquisitions of CCBPI, Purefoods and Cosmos Bottling Co. as key engines for growth. In a company analysis, it noted that there is “Plenty of synergy upside (that) should help earnings growth to 25% over the next couple of years despite depressed consumer spending.” It forecasts San Miguel 2002 earnings at PHP 9.32 billion. Philippine Equity Partners, Inc. agrees that SMC“s recent acquisitions, along with lower net financing charges, are expected to be growth drivers for the next few years. It estimates San Miguel“s 2002 earnings at PHP 8.78 billion. DBS Vickers Securities, meanwhile, sees company earnings at PHP 7.85 billion this year, and expects more surprises in terms of new acquisition announcements, noting that Kirin“s entry in SMC will boost the company“s war chest. Other 2002 earnings estimate for San Miguel includes the PHP 7.51 billion of ING Barings and the PHP 7.54 billion forecast of CLSA.

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