Brewer SAB Miller Beats Expectations

SAB Miller is an inherently strong business, say equity analysts, particularly in Africa, and we think management is focused on the right drivers

Philip Gorham 14 May, 2015 | 1:07PM

SAB Miller (SAB) released more details on the firm's fourth-quarter and full-year performance in fiscal 2014/15, and margins and earnings per share were slightly ahead of our forecasts. In the near term, however, we are unlikely to change our £36 fair value estimates for the ADRs and ordinary shares, respectively, beyond the impact of the time value of money, as we have doubts over the sustainability of the margin improvement.

Our wide economic moat rating remains in place, as we continue to believe SAB Miller has a robust cost advantage in several African markets. We regard the stock as being fairly valued.

As previously reported, full-year revenue fell 2%, but increased 5% on an organic, constant currency basis. SAB Miller reported modest upside to profitability, with the EBIT margin of 27.0% slightly ahead of our estimate. Management stated that input costs were essentially flat (we had expected a small increase in raw material expense) and that cost savings were greater than the initial $75 million in savings for fiscal 2014/15.

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Philip Gorham  

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