Coca Cola Femsa

Cheap Latam Coke Bottler

Here I am, this time with a quick note followed by an external link,

I assume my readers have the skills and the process to double check and conduct their own reviews if they like the stock idea.

Coca Cola Femsa is a Mexican company with a large South American size, reaching 261 million customers in Latin America. Its reach is really wide with Mexico, Colombia, Brazil, Argentina and the smaller countries. It is traded in the NYSE.

It is available for a reasonable PER 2021 of 18,1x and estimated 16.9x of 2022, and a 4.5% yield.

It is not a huge bargain, but a welcome discount to Coca Cola Company with a higher dividend.

-it has acquired many local brands, especially in Brazil and Mexico, that are not Coca Cola brands.

- the company leverage ratio is very low at 1 times Net debt/Ebitda. This was reduced over the past few years and the company seems ready for acquisitions.

-D&A matches investment year on year so PE is quite an accurate representation of the company's earning power and not free cash flow, despite many investments being growth investments (coolers to put in stores, productivity improvements)

-Long term consumption volume trends are growing in their main markets.

Year on year, it is adding much more returnable bottles that it is disposing off.

-It has assets in Venezuela. Should the country become good again, it will be a growth opportunity.

Recent news

• Coca-Cola FEMSA is running pilot programs to test the distribution of leading spirits and consumer brands in Mexico and Brazil as well as the distribution of leading spirits brands and other alcoholic products in Colombia and Panama

• On August 11, 2021, the Company announced that its subsidiary in Brazil, reached an agreement in conjunction with Coca-Cola Andina, to acquire the Brazilian craft beer brand “Therezópolis”.

• On September 16, 2021, the Company announced that its subsidiary Spal Indústria Brasileira de Bebidas S.A. and the Coca-Cola System in Brazil had signed an agreement to distribute Estrella Galicia beers in the country. This agreement is consistent with the Coca-Cola System’s long-term strategy to complement its beer portfolio in Brazil.

Overall, while not a bargain, it is still undervalued and a reasonable dividend payer with a very stable business, in countries benefiting from commodity tailwinds.

I just saw a very detailed thesis on Seeking Alpha, it is worth Sharing as it will give more details on the management and strategy. I agree with the author except for me, I don’t use discount rates, especially a high one like this, and I think it is more undervalued than the author.

https://seekingalpha.com/article/4474372-coca-cola-femsa-a-good-dividend-investment

Thanks

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