Asahi Group Holdings Ltd. (ASBRF, Financial) announced it is buying three breweries from AB Inbev (BUD, Financial). Asahi is the 12th-largest brewer in the world and controls about 1% of global production.
The stock trades at 3,497 yen ($30.33), there are 458 million shares and the market cap is 1.6 trillion yen ($13.9 billion). It takes 115 yen to buy one dollar. Twelve-month earnings per share are 95 yen and the stock trades at a price-earnings ratio of 36.8. The dividends last year were 50 yen and the dividend yield was 1.4%.
Asahi controls half of the Japanese beer market and is a leader with the Asahi brand. Asahi also sells wine, liquor, food, candy, baby food, pop and juices. The brand name of its wines is “Alpaca.” The company may want to change the marketing if it ever wants to take the wine to the U.S. Outside of Japan, Asahi distributes brand names like Pepsi and Schweppes. Before the recent acquisition, 52% of sales were alcohol, 26.4% were soft drinks, 6.2% were food, 13.4% were overseas and 1.6% were “other.”
The beer portfolio is what interests me. Recently, Asahi purchased Pilsner Urquell (Czech) and Tykie and Lech (Polish) from AB Inbev for $7.8 billion. Asahi was competing against Bain Capital, Switzerland-based Jacobs Holding AG and PPF Group, an investment firm controlled by Czech businessman Petr Kellner, according to the Wall Street Journal. The company also purchased Peroni and Grolsch for 2.55 billion euros ($2.7 billion) from SABMiller, now a division of AB Inbev.
According to a press release from Asahi, sales from the recent acquisition totaled 1.6413 billion euros and 493.8 million euros in Ebitda. Since Asahi paid Inbev 7.3 billion euros, the price to sales ratio is 4.44 and the price to Ebitda is 14.7. A little pricey. However, if Asahi is able to take these brands into foreign markets and use its experience and clout, it could be a good thing. I wonder if Asahi can get these brands into China and Japan.
Asahi’s sales were 1.489 trillion yen in 2010 and grew to 1.857 trillion yen in 2015. Good growth. Net income grew from 53 billion yen to 76.5 billion yen over that time frame. Free cash flow was about 61 billion yen last year and usually ranges from about 60 billion yen to 100 billion yen. The free cash flow yield was 1.7%. Return on equity is usually in the 8% range. Operating margins are in the 7% range.
Like many Japanese annual reports, Asahi’s is quite facile. It is only a few pages and does not break down the balance sheet. Its debt is A rated. About 30% of stockholders are Japanese insurance companies and cross holdings of other companies. This is very common in Japan. Cash is 43 billion yen, accounts receivables 362 billion yen and financial obligations 415 billion yen. Asahi has eight series of debenture bonds, totaling 148 billion yen, maturing over the next five years. It has a strong balance sheet but I would like greater detail.
The stock was at 4,300 yen back in July and is now at 3,497 yen. That is quite a drop.
Here is what I would like to know about Asahi. What are the real estate holdings and what are the holdings in other corporations? Anytime you want to buy a Japanese company, you need to know these things first. You cannot go on earnings per share and dividends alone. Japanese stocks have too many hidden assets.
Disclosure: We do not own shares.
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