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Thursday 18 December 2014

‘Big Beer’ enjoying big year in stock values

11th July, 2014 by Neal Baker

“Big Beer” stocks have been enjoying an unprecedented surge in the first quarter of this year, with AB InBev and Heineken seeing their valuations rise by around 20%, and SABMiller up by nearly a third.

stock+marketAll three global brewers now fetch relatively high earnings multiples (the ratio of company valuation to company earnings), showing high investor confidence in the businesses.

InBev, Heineken and SABMiller are currently trading for 19 times, 18 times and 22 times their earnings respectively.

InvestorPlace reports that a key factor in this stock success is the companies’ moves towards long-term holding in the developing markets of Africa.

Investors have been gaining confidence in emerging markets like Africa of late, which stands Big Beer brewers – who have been on one long global acquisition-spree for the last 20 years – in good stead.

Heineken and SABMiller are poised to enjoy the rise of the African market most, as they are currently taking 21% and 31% of their profits from the continent respectively – profits that are set to rise in line with the burgeoning African economies.

Per capita African GDP has more than doubled in the past decade, and according to Deloitte, seven of the 10 fastest-growing countries in the world are in Africa.

As African living standards rise, it is expected that the standards of African drinkers will also increase, as the continent moves away from home-brewed beers and moonshine – currently estimated to account for 80% of consumption.

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