Associated British Foods Share Discussion Threads

[r ball] 03/1/2014 08:33

proxy for Next?

[arja] 21/12/2013 20:38

still NOR stock with more to come !

[alphahunter] 28/11/2013 19:10

This stock won't go down; it gets bought on the dip.
Analysts won't come out and say: reduce/sell this is beyond our fair value.
Only a DCF could vaguely justified this price, e.g. a jam-tomorrow valuation ignoring the risk that what works in the UK may not work in France. Oh well.


Still a short position holder.

[el chupacabra] 26/11/2013 20:14

ABF is all about Primark now days :)

[alphahunter] 26/11/2013 20:10

Thanks El.
Best rice, no doubt.
I hope ABF will overpay for this acquisition.

Still hold a short position here, looks overvalued compared to the usual suspects.
Suedzucker characteristically warned a couple of days back. ABF had already prepared the market for a lower sugar EBIT, so not much of an action point.

[el chupacabra] 26/11/2013 17:27

The owner of Primark is among the contenders to buy Tilda, the UK's biggest rice brand, Sky News understands

[nissi_beach] 26/11/2013 17:23

There's a sign owners feel the share price is at a peak

[alphahunter] 26/11/2013 16:45

On 25 November 2013, George Weston sold 65,022 shares at a price of 2271.5 pence per share, for the purpose of meeting his tax liability on the 137,928 shares acquired on vesting and, on the same date, John Bason sold 62,584 shares at a price of 2271.5 pence per share, partly for the purpose of meeting his tax liability on the 92,584 shares acquired on vesting. The transactions took place on the London market.


Shall we conclude that John is getting his cash ready for expensive Christmas presents?

[nissi_beach] 20/11/2013 07:33

Alpha while I am also negative because of sugar downside it appears to be moving with the Ftse for now.Still watching for potential short entry

[alphahunter] 19/11/2013 23:13

Thanks Polapsis.
The link is just an ads for DP.
Tate's is cheap on a FcF yield basis, unlike ABF. But the market seems to think otherwise on the latter, or is happy to pay even more for so-called "visible growth" and the analysts will keep their "hold" ratings despite the current price well above their target prices. Still hold a short position here.

[babolat] 18/11/2013 12:40

Not a holder but thought I would pass this on.

I've just been in the new Primark in Cartagena (Spain) and, on a Monday morning, it's rammed.

[polapsis] 15/11/2013 16:22

I've just come across this trading guide by Dominic Picarda in which he identifies Tate & Lyle as one of his 5 trading picks for the rest of the year

hxxp://ow.ly/qRty1

Seems relevant to anyone investing in the food sector and might be a good place to move profits from ABF

[alphahunter] 12/11/2013 13:15

Just opened a short position at 2260.
Looks overvalued - low FcF yield and Primark's growth priced at a premium to the usual suspects.

[nissi_beach] 06/11/2013 18:51

Volatile day what tomorrow ??

[brain smiley] 06/11/2013 12:33

Associated British Foods PLC (ABF:LSE): Last: 2,337, up 129 (+5.84%), High: 2,349, Low: 2,199, Volume: 736.84k

BE

So .... there's a real fight developing here.

BE

Half of The Wharf is saying "you're paying 21 times current-year earnings for no growth, are you nuts?"

BE

And the other half is saying, "ah, but the growth's later. Much, much later."

BE

Starting with the bear case, Merrill sets it out very well.

BE

They reckon that when you put the rest of AB Foods on 14 times calendar 2014 - which still looks extremely punchy for sugar processing and Ovaltine - then Primark's on 26.4 times

sugar processing and Ovaltine - then Primark's on 26.4 times

BE

Which is a premium to its European peer group, H&M and Inditex.

PM

This is very funny

PM

Primark on 26 times

BE

This is how Merrill break up the PE ratios.

BE


Actually, let me share the note as well. It's an "all in the price" type argument.
BE

YTD, ABF's shares are +39% (+20% in October) outstripping both Inditex (+12%) &
H&M (+20%) on cont'd optimism for Primark's expansion. Post solid FY13 results
(p.3) we believe ABF's valuation is now fairly full. The shares trade on a FY14E PE
of 21x (hist. range 12-19x). Primark now trades on an implied CY14E PE of 26x
(10% premium to H&M & Inditex), assuming the rest of ABF trades on 14x (p. 4).
While we are big fans of Primark's long-term growth prospects (we forecast 1.3m
sqf in new space in FY14), retail still only comprises 50% of ABF's profits and faces
particularly challenging LfL comps of 7%in H1 while Sugar remains under pressure.
We leave our FY14E EPS unch. but cut our FY15E EPS by 3% on FX and lower EU
sugar profits. We lift our PO to £23 reflecting the re-rating of the EU retail sector.

BE

"Ah!" Say the bulls. "Ah!"

BE

Shift the numbers out to 2015 and Primark's suddenly at a discount to peers.

BE

Bump them out to 2019 and it's cheaper than a Bangladesh-stitched hoodie.

BE

Morgan Stanley incoming ...

BE


Primark growth is set to accelerate with over 1m sq ft of additional selling space in FY14e vs. 0.8m in FY13. We forecast Primark LFL growth p.a. of 4% and selling space growth p.a. of 12% over the next 5y and we expect Primark to account for 57% of group profits by FY18e. Our reverse SOTP implies a 10.4x 2015e EV/EBITDA for Primark, a 20% discount to peers. As Primark continues to outperform and accelerate its expansion in Continental Europe, we see this discount narrowing.



BE


...while momentum in Grocery should continue to strengthen. Expect the margin improvement in Grocery to be mixm driven as high margin businesses such as Twinings Ovaltine, Patak, Blue Dragon continue growing double digit.



BE


ABF now trades
in line with its 5-year average PE relative
to EU clothing retailers. We think this
does not reflect the fact that Primark's
contribution to group sales and profits has
increased by 9p.p. and 8p.p, respectively,
over that period. Our reverse SOTP
implies a 10.4x 2015e EV/EBITDA for
Primark, a 20% discount to peers. We
expect this valuation gap to narrow over
the coming months as Primark continues
to outperform and accelerates its
continental Europe expansion.



BE


While we view FY14 as a
year of transition, we expect Primark to
drive 8%+ group top-line growth and
11-13% EPS growth from FY15e, making
ABF one the most compelling growth
stories in our Staples universe.



BE


EU sugar prices and industry
profitability have already started to reflect
new market mechanisms, and we expect
newsflow to continue to deteriorate over
the coming months.



BE

And UBS, who make the most convincing case I've read ....



BE


we believe the best way to value AB Foods is to look at the sum of its parts. Within that sum of the parts, the 'jewel' is Primark (currently c50% of group profits). Primark is a hard discount clothing retailer that combines very low prices with a 'fast-fashion' component to generate best-in-class sales densities. This formula has been very successful in the UK (where Primark has consistently grown share for over 15 years and currently accounts for c5% of the apparel category) and is now being rolled out successfully in continental Europe (indeed sales densities there are even higher than in the UK). However, with so far only 50 stores in continental Europe (two thirds in Spain), Primark is at a very early stage in its international development. To capture this long term growth opportunity, we value Primark employing a 20yr DCF (that assumes 9.5% sales CAGR, of which 2% is LFL). This involves a quadrupling of floorspace by 2033, which assuming a slightly bigger store size, implies c825 stores (H&M currently has 400 stores in Germany alone).



BE


Our £12bn valuation for Primark equates to a CY14 EV/Ebitda of 16x; versus Inditex on 15x and H&M on 14x. Whilst Primark's hard discounter business model (low gross margin/high sales velocity) means it is not as cash generative as those two retailers, it is (from a much smaller base) currently growing its top-line significantly faster (in FY13 Primark's constant currency sales grew by 21%). In addition AB Foods has in the past accelerated Primark's roll-out by acquiring existing retail operations and converting (the most attractive) stores to the Primark format (e.g., the acquisitions of Littlewoods and C&A in the UK). It would not surprise us if management employed this approach in continental Europe, particularly in Germany where there is a significant amount of department store floor space currently generating very low returns.



BE


In our view the four critical KPIs for Primark are; (1) Continuing to grow share in its origin markets of UK/Ireland. (2) Continuing to enter new markets. (3) Positive LFLs in continental Europe. (4) Improving sales densities. Providing it 'hits' all four (as it is currently), we think the burden of proof will be on those who question its international capability.

Based on the current share price, our £12bn valuation means Primark represents c.70% of AB Food's market capitalisation. Whilst this means that investing in AB Foods is an effective way of 'playing' the Primark structural growth story, it implies the remainder of the group is trading on an EV/Ebitda of approximately 6x. Whilst the 'rump' includes attractive businesses such as Twinnings Ovaltine, it also includes a commodity sugar business, where we have recently seen a number of downwards revisions to estimates.

[nissi_beach] 06/11/2013 11:22

fieldhouse

might not make much difference because they are at quota level already.

It will mean more on world market depressing the price

[alphahunter] 06/11/2013 10:50

Well done Nissi for covering on time.

SocGen got wrongfooted earlier this year on a valuation call with a sell. I guess that they thought twice this time, as their methodology hasn't changed between then and now. We are in momentum land it seems.

Next, Citigroup will use ASOS as a benchmark for valuation purposes.

Hmmm.

[fieldhouse] 06/11/2013 10:27

Sugar beet harvest going very well with bumper yields.!!

[nissi_beach] 06/11/2013 09:17

It is strange how it has pulled back up so strongly. Must have taken more notice of the positive note. closed the short early on while i had a small profit.

will go back to watching

[phoenix1234] 06/11/2013 08:44

sell, sell, sell

www.shareprophets.advfn.com/views/2339/associated-british-foods-a-screaming-sell-after-the-annual-results

[nissi_beach] 05/11/2013 21:49

It is a well run company and the smaller free float might explain some of the higher PE.The share price increases this year was always going the demand all there business performed to keep a higher PE. Broker notes might suggest more shorting potential.

[alphahunter] 05/11/2013 20:16

Credit Suisse Neutral 2,208.00 1,850.00 1,850.00 Reiterates
Canaccord GenuitySell 2,208.00 1,663.00 1,663.00 Reiterates
Numis Reduce 2,208.00 1,845.00 1,845.00 Downgrades

[alphahunter] 05/11/2013 17:48

2.57% stock on loan. Low to lower-middle level.

GB0006731235 ASSOC BRIT FOODS 8266776.34 321167295 2.57

[alphahunter] 05/11/2013 16:51

Nissi,

Thanks for that.

What is quite puzzling is that ABF rallied more than the peer group that I've just mentionned over the last 6 months and is now trading at the same EV/EBITDA multiple as NEXT and only a slight discount to H&M, Ted Baker and to a less extend Inditex. Yet Primark is only 40% of the EBIT. And no allowance for a conglomerate holding discount in a sum-of-the-part approach.

The better than expected net debt has a lot to do to with lower than expected capex as well. Quality management & company, but unnlike their garnment, quite pricey imho.

[nissi_beach] 05/11/2013 16:20

alpha

the run up in share price was based on general FTSE rise and good news around Primark.

The market chose to ignore the much bigger risks around sugar. They are only just waking up the the fact a static earnings picture for 1314 does as you say not justify the higher PE.

I think the ii's were not very short going into these so are wondering what to do, Cash in longs or go short.

Broker rec over next few days will bring in some sells with £20 targets

£21 within next few days