Cains Beer Share Discussion Threads

[tiredoldbroker] 20/7/2007 15:50

For me the problem is still the £35m of debt, which is going to limit their freedom of action. If they are having problems with adjusting to life since the ban on smoking in pubs and workplaces, I can see the shareprice slipping lower still. Obviously not as expensive as when it was 28p but on balance I think there's more downside risk than potential for gains, even at 19p.

[relishing] 20/7/2007 15:01

Is your view still the same at 19p tob?

[tiredoldbroker] 20/7/2007 15:00

I'm sure the brewery will be well run, my negative comments a while back were entirely about the enterprise value (shares + debt) being too high, and the risk of significant downside in the shares from that level.

[tiredoldbroker] 20/7/2007 15:00

I'm sure the brewery will be well run, my negative comments a while back were entirely about the enterprise value (shares + debt) being too high, and the risk of significant downside in the shares from that level.

[luchan] 20/7/2007 14:01

Chaps,

only live five minutes walk from Cains brewery & went on a brewery tour there last year. The place seemed well organised & efficient.

luchan.

[relishing] 20/7/2007 13:20

Very disappointing.

[tiredoldbroker] 20/7/2007 13:19

Price back down below 20p and looking soggy. Not surprised.

[dotto] 26/6/2007 22:30

From the Liverpool Daily Post

Toxteth brewer aims to buy more pubs
Jun 25 2007 by Bill Gleeson, Liverpool Daily Post

STOCK Market-quoted Cains Beer Company wants to expand its pubs estate through acquisitions.

The Toxteth brewer's managing director told the Daily Post there would be a pause for consolidation over the next two years following its recent flotation, but the company would be looking to expand the number of pubs it owns thereafter.

Speaking during a podcast interview with Daily Post business editor Bill Gleeson, Cains co-owner Sudarghara Dusanj said he hoped to take the Liverpool brewed premium beers across the Pennines to Yorkshire. Mr Dusanj said: "We want to consolidate in the next couple of years. Once we have done that, we would be very interested in expanding the estate. Its a key part of our strategy to own more pubs.

"The North is where we'd like to stick to. Quite happy to take it up to Leeds. The North West and bor- dering slightly out is the geograph- ic area we are keen to expand."

The podcast interview can be heard in full at thebusinessweek.co.uk

Cains floated on the Alternative Investment Market two weeks ago by reversing into Preston-based pub chain Honeycombe Leisure. Honeycombe owned an estate of 100 pubs, whereas Cains brews beer sold through supermarket labels and for its own premium range of cask and bottle beers. Cains owners, Sudughara and his brother Ajmail ended up with two thirds of the merged business. Some shares were also placed with City institutions.

Mr Sudughara said he had no regrets about the price at which his company floated onto the Alternative Investment Market two weeks, despite the fact the share price has risen five fold since.

He said: "It was difficult to pitch where to start. Cains is only really breaking even. It was losing £2m a year. Its a turnaround and Honeycombe is also a turnaround.

"It's a long-term play."

He said the key was to build the business and improve the margins.

"80% of Cains business relies on supermarket and canning contracts. The margins are paper thin. It's a tough industry.

"The thing now is to build on the brand, the premium lagers and other bottled beers."

[relishing] 21/6/2007 15:58

Beer gone out of fashion?

[1mb] 21/6/2007 14:08

A number of large trades going through here , any thoughts anyone ?

[tiredoldbroker] 14/6/2007 09:31

Incidentally, Tadtech, and just in passing, over the years most people have come to refer to me as TOB for short (well, I don't know what they call me in private, that's their own business, lol).

[tiredoldbroker] 14/6/2007 09:29

Tadtech, obviously it takes two views to make a market, and I'm happy to chew this one over. I don't believe there is a predator waiting in the wings, because (a) Honeycombe's pubs were up for sale for a long time and didn't attract a buyer (and could have been had much cheaper then than now), and (b) I don't believe the Dusanj brothers would waste money on reversing Cains into HCL if they'd had a cash buyer lined up, and (c) a hostile offer won't work as the board hold over 50%.

As far as the share price goes, my reading of the numbers doesn't support this level, and I'll explain why. All the numbers are in the merger document at and are thus the company's own.

In the year to 30.4.06 HCL made a loss at the operating level (before interest, exceptional charges and tax) of £121K; in the first half of this year, stripping out fixed asset items, they roughly broke even. Their cost of sales (i.e. purchases of all stock for sale, not just beer but spirits, food etc) was under £26m and will be lower this time. Their pub estate was not in good shape, after years of under-investment. In the year to 31.10.06, Cains made a profit at the operating level of £386K.

I do believe that with new management, they can earn more from the old HCL estate. I'd also suggest that a percentage of HCL pub beer sales can be supplied from Cain's brewing division, which will help margins there. But the problem is, I think that the better profits will largely go on servicing the £35m mountain of debt; even at 7%, the interest bill would be £2.45m a year. As the old HCL pub estate really needs money spending on it, I don't see immediate scope to cut debt, and it may even be that as Cains total sales last year were just £24m, scaling up to supply the HCL estate may require further capital expenditure, on kegs and lorries if not new brewery equipment.

So my conclusion is that the combined CBC business is probably stronger than either Cains or Honeycombe were as separate entities; but that the likely improvement in trading is simply not enough to support all the debt and a market value at 28p of over £42m. I don't think I'm simply looking back at historic trading, I really am trying to base my valuation on what CBC might manage in the future, and it isn't enough. I can see that the bank was very pleased to see HCL secure a deal which gave the bank more security, and better cover on the interest bill, but I think it may be a long haul to produce value for anyone buying at this level. The problem is that the £35m debt won't go away, and the shares are like a highly geared "stub" on whatever the residual value may be, after allowing for the debt.

[tadtech] 13/6/2007 20:54

oldbroker


As you have been researching this for a long time I am wondering what your thoughts are on the recent advances and in particular the persistant large buyer.

It is possible that this could attract a predator. As I mentioned on the other thread I feel historical financial performance is just that, this was your concern a while back.

I am also curious as to the poster who suggested a broking friend advised these could hit 40p quite quickly. I do not take much notice of BB ramps usually but this stock intrigued me somewhat. His tip was made at a much lower price too so now it seems to have some credability.

Usually there is no smoke without fire and the buyer today was happy to pay 28.25p for 150k and has been paying over the offer in size over the last few days.

This could be an interesting play up to that target of 40p making a cap of £60m. Is that a high figure given a decent brand and a chain of 100 pubs making reasonable profits. I think not.

Will be adding some tomorrow.

[tadtech] 13/6/2007 14:47

Even small trades now hitting full offer price. More to come IMO.

[relishing] 13/6/2007 11:21

Good defensive sector as well. Even if the economy goes down the pan, people lose their jobs and houseprices crash, they'll still want to go to the pub and drown their sorrows with their mates. Even more so!

[tadtech] 13/6/2007 11:04

Large buyer still adding. Now picking up in chunks of 150k it seems, happy to pay above offer too.

I feel the journey is just starting with this stock.

[relishing] 13/6/2007 10:51

Big range of quality beers. Yes, they may make the cheap stuff for the supermarket own brands as well, but that's good - wide range of the market covered.

Even Cains ordinary best bitter is far superior to the likes of John Smiths etc, which everyone I know who used to drink it is bored silly of.

I think it was Mr Buffet said "Buy what you know", and I know this product pretty well!

Also intending to take a tour around Cains brewery next time i'm up in Liverpool (nothing to do with holding this share).

[relishing] 13/6/2007 09:39

Bought 15k at 28.45p earlier.

[tadtech] 13/6/2007 09:00

Just added it took 20 mins to fill order of 4k!


From The Times recently, could explain why the interest here. I like the bit where they suggest Cains could be a 'national player' That if they do not get taken out first.




'The acquisition will allow the brewery to boost its sales by putting its range of Cains beers, which include bitter, mild and lager, into the Honeycombe estate, creating a vertically integrated brewer.

The brothers are thought to see the deal as the platform to turning Cains into a national player.

[tadtech] 13/6/2007 08:29

Buyers still nibbling away. I doubt our 100k buyer has finished yet.

[bigbobjoylove] 12/6/2007 17:24

nice T trade @ 29p from 15:45.

[bigbobjoylove] 12/6/2007 15:36

must be short on stock, can only buy 25000 online at full ask, can sell 75000 well over the bid, looking good for a run north this one.

[tadtech] 12/6/2007 15:14

Seems to be some volume behind the rise here. Another 100k buy too. Looks interesting.