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Investec punts SABMiller despite Foster's bid


Fin24 - Jun 28th 2011, 12:08

London - Investec Securities recommended buying shares in SABMiller [JSE:SAB] on Tuesday as it became one of the first brokers to see the positive in its bid for Australian beermaker Foster’s Group. 

Since SABMiller, the world’s No 2 brewer, launched its cash bid for Foster’s on June 21 - A$4.90 per Foster’s share, or a total of A$11.2bn ($11.7bn), including debt - shares in SABMiller, a predominantly emerging market brewer, have been on the slide.

“We are feeling a bit more upbeat on Foster’s than the rest of the market. In any case the risks are finite and the damage to SAB’s developing and emerging proposition can be overstated,” said analyst Martin Deboo at Investec.

Foster’s aside, Deboo say SABMiller’s valuation is looking compelling, with the London-based brewer expected to be the fastest-growing company by some margin among the 30 or so global consumer goods companies the broker covers.

“We are therefore resolved to swim against the short-term tide and are upgrading our recommendation on SABMiller to buy from hold and raise our 12-month target price to 2.475 pence from 2.360p,” he said.

SABMiller shares fell around 4% on the day of the Foster’s bid from 2.182p at the previous day’s close, but this week are starting to claw back some of the losses and were last up 0.7% at 2.173p in morning trade, in line with the London stock market.

SABMiller’s bid values Foster’s at 12.5 times forecast earnings before interest, tax, depreciation and amortisation. Investec says this compares to recent mature market deals such as Kirin’s bid for Australia’s No 2 brewer Lion Nathan at 13.1 times in 2009, and InBev’s bid for Anheuser-Busch to create the world’s biggest brewer AB InBev in 2008 at 13.8 times. 

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