AB INBEV: When high debt is no longer a liability | BUY | EUR65(+22%)
AB INBEV - BUY | EUR65(+22%)When high debt is no longer a liability
Ever since the acquisition of SABMiller, AB InBev’s debt levels have been a worry for investors, reflected in a higher risk premium and lower valuation. However, in the current high-inflation environment, AB InBev’s debt is a significant source of value creation. While inflation increases top-line and profit figures, it decreases the value of debt. And no other beverages company has the same high debt levels as AB InBev (net debt/EBITDA of 4.0x). However, with an average duration of 16 years and 93% at fixed rates, the company can easily fulfill its debt obligations. In the next 10 years it needs to pay back on average USD2.9bn p.a. compared to an annual free cash flow of over USD10bn. Furthermore, with rising interest rates, AB InBev has the option to buy back debt at significant discounts. On top of that, the currency mismatch (33% of debt is in euros compared to only 4% of revenues and profits) should play to its advantage.
AB Effectenbeteiligungen AG is an Austria-based company that invests in European companies. The Company is engaged in the investment in undervalued small-cap and micro-cap companies, in medium-sized companies with a growth potential, as well as in pre-initial public offering (IPO) companies. In the fiscal year ended on December 31, 2009, AB Effectenbeteiligungen AG's portfolio included Rhoen Kliniken AG, a Germany-based hospital operator, Realtime Technology AG, a Germany-based provider of visualization technologies and services for industrial applications in the automobile, aviation and consumer goods sectors and RIB Software AG, a Germany-based specialist in building construction, plant engineering and infrastructure management software.
Since 1996, Bryan, Garnier & Co has been growing with an absolute conviction that the investment banking landscape would experience a major revolution: most of the large local generalist banking groups will disappear to the benefit of a handful of global powerhouses, and an emerging group of independent, highly specialised boutique investment banks.
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