Diageo Share Discussion Threads

[essentialinvestor] 27/9/2023 12:24

Thanks, you are right in terms of the multiple it's the same sector to look at.

[laurence llewelyn binliner] 27/9/2023 12:24

There should be more than a few limit buy orders set for GBP30.00 including mine.. :o)

[disc0dave46] 27/9/2023 12:12

EIYes just checked FY06/23 and it's as you say 18.4x. Got the 16x from Stockopedia for FY23 which had eps normalised 189p, giving a PE of 16.1x

[essentialinvestor] 27/9/2023 12:00

Dave, I have DGE on 18.4 X FY forward. 16.9 X on '25 FY.

Obvs based on current consensus, which can alter.

[disc0dave46] 27/9/2023 11:49

For the US:Constellation Brands - PE 24xBrown Forman - PE 38x

[disc0dave46] 27/9/2023 11:38

It does, but personally wouldn't value a business on an index that's heavily skewed by different sectors.The top 5 alcoholic beverages companies in the world by market cap (as of March 2023) are: Kweichow Moutai Co Ltd - PE 32xAnheuser-Busch InBev - PE 18xWuliangye Yibin Co Ltd - PE 22xDiageo - PE 16xHeineken - PE 19x

[sumday] 27/9/2023 11:31

If however DGE was thinking of moving to NYSE, the Dow P/E as of 6 September was approximately 18.93. DGE has a P/E of approximately 18.5.

[anhar] 27/9/2023 10:55

FTSE100 current P/E is 11.4 according to Simply Wall St so DGE is dear on this basis.

[makinbuks] 27/9/2023 10:53

I agree, every stock picker in the London market is looking at buying this I should think

[disc0dave46] 27/9/2023 10:48

It's already on a low rating of 16x, the lowest for over 5 years, it's 10 year average is 21.2x. Forward PE is 18x. So yes it's derated given the macros but £25 is a forward PE of 15x, can't see it but who knows in this market. IMO strong resistance at around £30 and RSI is now edging to being oversold.

[anhar] 27/9/2023 10:36

Low of the year. Shall I bite it ? Any views?

In fact it's the lowest for about two and a half years. Whether you should invest or not depends on your strategy, eg. short term trader seeking capital profits; long term income investor (me); long term capital gains investor etc.

All I'd say is that on a P/E and yield basis, the former being high and the latter low, it's expensive against the market, even after the recent falls. Against that there are few if any other consumer product businesses with such strong and international brands. So for my strat I've bought more recently at lower prices to bring it up to average value in my income port though note that my intended hold period is forever. Booze is one of my must-have core sectors.

But you shouldn't listen to anyone here, including me, because nobody knows anything about the future. So we're all on our own really.

[action] 27/9/2023 10:27

I hope you are correct. Hl is also highlighting risk of high valuation.

[billy two cocks] 27/9/2023 10:25

I stand by my £25.

This has lost it's fizz.

[action] 27/9/2023 10:19

Low of the year. Shall I bite it ? Any views?

[essentialinvestor] 27/9/2023 10:18

Reporting in USD is a precursor to moving their primary listing to NYSE - at a guess.
DGE says..no current plans to..but the writing is on the wall.

As they've cancelled their Dublin listing, sentimental reasons won't stand in the way.

[anhar] 27/9/2023 10:04

Sterling weakness may have a small beneficial effect on future divis when the payments are converted to pounds, which is of interest to me as purely an income investor. DGE is a low current yielder, in fact the lowest in my port, but I hold it as I want to be in this sector for diversification reasons.

[makinbuks] 26/9/2023 16:05

£ weakness vs $ used to be favourable but won't matter now the accounts are dollar denominated

[billy two cocks] 26/9/2023 16:01

There seems to be constant share price erosion.

I would very much like to buy back the holding I sold earlier this year but the re-purchase will have to have a 2 in front of it. At £25, I'll be filling my boots.

In the meantime, interest received on the proceeds is quite a lot more than dividend.

Good luck all.

[essentialinvestor] 26/9/2023 14:33

Not the boy plunger, eh - Jessie Livermore's early nicknane.

[plunger2] 26/9/2023 14:32

Agreed. Couldn't sit on my hands anymore.
Topped up what is already a decent holding.

GLA

[888icb] 26/9/2023 14:03

If it’s good enough for Warren Buffet then it’s good enough for me. 45% of the shareholders are US based. The US is Diageo’s largest market so that’s a good sign.The current fall that the shares are experiencing is difficult to comprehend but it just appears a good opportunity to average down for long term investors.

[disc0dave46] 26/9/2023 13:34

Seems determined to hit £30.

[makinbuks] 21/9/2023 16:26

Nick Train makes it all sound so simple! Sounds like Deborah Crew is carrying on where Ivan Menezes left off. Excellent. Astonishing, in the context of recent commentary on the lack of investment in the UK market, that no other UK fund holds a significant stake

[essentialinvestor] 15/9/2023 06:43

Having said yesterday morning it would not surprise me to see DGE below £31 this week,
we promptly get a 2% intra-day reversal.

[jonwig] 15/9/2023 06:39

Here are Nick Train's FGT comments -

Back in 2019/20 Diageo CEO Sir Ivan Menezes, very sadly no longer with us, told us
he had set a stretch goal for the company, of taking its share of the global TBA (total beverage alcohol) market from 4% in 2020 to 6% in 2030. That would be a 50%
increase in share in a growing industry and struck us as a worthwhile, if ambitious, target. Particularly if it could be achieved without impairing Diageo’s existing high rates of return (ROC 17%, ROE 48%).

We were impressed, therefore, to hear from Ivan’s successor, Debra Crew, that by the close of its fiscal year 2022/3, as announced in its annual results in August, its share of global TBA had increased from 4% to 4.7%; well on the way to achieving the 2030 objective.

It is, we think, well worth considering Debra Crew’s comments about the objective and the resources Diageo can bring to bear in achieving it. “Even as the leading company in international spirits,” she said, “we are a relatively small player with a diversified geographic footprint and advantaged portfolio in a very large and attractive industry.”

In other words, Diageo, with great brands, global distribution and a strong balance
sheet, has a long growth runway ahead of it. It is also worth considering some of the company-specific qualities of Diageo that make its blue-sky goals achievable.

First, note its revenues in 2022/3 are 30% higher than in 2019. Covid really gave a boost to existing trends in global beverage consumption, notably consumption of premium spirits. Diageo’s “premium”; sales now stand at 63% of total, up 7% since 2019. And its three biggest categories, which amount to c.50% of net sales, continue to grow well. Scotch is the largest and up 30% since 2019. In 2022/3 scotch sales grew another 12%, led by Johnnie Walker, up 15% and further
reinforcing its position as the world’s number one international spirits brand.

Next is beer, which grew at 9%, led by Guinness at 16%. Guinness has just reported the single best year in its history and its prospects look brighter than ever.

Third is tequila, where revenues have quadrupled since 2019 and grew 19% in 2022/3. Key brands Don Julio and Casamigos were up 20% and 16%, respectively. Diageo is global number one in tequila, with those two brands in the top two positions. The growth in tequila has, so far, been largely a US phenomenon. We like Debra Crew’s call to arms: “My ambition is simple. I want to take tequila around the world. We are the people who have done that successfully with so many brands… And there is no one better placed to do it.” To give that ambition more credibility, she noted that net tequila sales in Europe doubled last year, albeit from low levels.

Given these trends and Diageo’s competitive advantages, we think its capital allocation policy is sensible. Debt was up £2.5bn last year to £15.2bn – 20% higher than 2019, though still at the bottom end of Diageo’s target debt/EBITDA range (earnings are up 30% since 2019). Uses for that additional capital include capex (£1.2bn), laying down more stocks of precious maturing liquid, and the continuing buyback of shares.

Diageo retired £1.4bn of stock in 2022/3 and announced a further £800m buyback for 2024. Evidently Diageo is both investing into its clear growth opportunity and, at the same time, taking advantage of its anomalously low share price (at least low in our minds).

On that point, we note Diageo’s decision to change its currency of formal account, from sterling to US dollars. It is doing so because the US represents a growing proportion of both Diageo’s revenues (it is its biggest market) and its shareholder register. Around 45% of shareholders are US and, apart from Lindsell Train, there is no other active UK investor in the top-10 holders. Within that top-10, both the Bill Gates Foundation and Berkshire Hathaway sit as reassuring long-term and growth-oriented investors.

Diageo shares closed down 5.5% in August and are down over 10% year-to-date.
Short-term disappointment, as Covid sales growth slows, but on Bloomberg’s estimated 19x 2024 earnings, full of promise and value, we hope.