DEO

Diageo Shs Sponsored ADR Repr 4 Shs

Consumer


Presented:08/12/2015
Price:$109.27
Cap:$68.76B
Current Price:$134.53
Cap:$74.73B

Presented

Date08/12/2015
Price$109.27
Market Cap$68.76B
Ent Value$90.01B
P/E Ratio18.24x
Book Value$16.37
Div Yield2.9%
Shares O/S629.25M
Ave Daily Vol837,612
Short IntN/A

Current

Price$134.53
Market Cap$74.73B
Diageo Plc produces and distributes beverage alcohol with spirits, beer and wine brands. Its spirits, beer and wine brands include Johnnie Walker, Crown Royal, JeB, Buchanan's, Windsor and Bushmills whiskies, Smirnoff, Ciroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness. The company owns manufacturing production facilities across the globe, including maltings, distilleries, breweries, packaging plants, maturation warehouses, cooperages, vineyards, wineries and distribution warehouses. Diageo was founded in December 1997 and is headquartered in London, the United Kingdom.

Publicly traded companies mentioned herein: Anheuser-Busch InBev NV (BUD / ABI BB), Diageo PLC (DEO / DGE LN), Heineken NV (HEIA NA), LVMH Moet Hennessy Louis Vuitton SE (MC FP), Pernod Ricard SA (RI FP), SABMiller PLC (SAB LN), Suntory Beverage & Food Ltd ((2587 JP)

Highlights

The presenter is long shares of Diageo PLC (DEO) based on an earnings recovery and potential corporate realignment thesis. DEO shares historically have traded in the 18x - 21x range, and the multiple has held up which he views as “a testament to the durability of the company’s cash flow stream”. Expectations for fiscal 2016 have come in 30% over the past two years owed to a series of issues including: destocking, FX exposure, poor execution on M&A and capital deployment. At ~$110 he sees a favorable risk/ reward with +20% upside based on organic growth, and optionality above that if management chooses to monetize the Guinness brand and/ or DEO’s stake in Moet Hennessy and focus on the core Spirits business, which includes a number of the top premium brands in the world (i.e., Johnnie Walker, Ketel One Vodka, Zacapa Rum, Don Julio Tequila, and Tanqueray No. TEN, among others).

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Idea Discussion

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