Coca-Cola HBC: Closing our short position (upgraded to HOLD)
Following the c.15% share price derating (c.6% underperformance vs. the FTSE 250) since the 1H18 results announcement, we upgrade Coca-Cola HBC (CCHBC) to HOLD, with a new price target (PT) of GBp 2,430/share. Our upgrade is primarily on valuation grounds, as the consensus 2019E EV/EBITDA of 9.3x is at a 3.5% premium vs. its peers and justifies the fundamentals, in our view. For 2019E, we believe that pricing could be a running theme supporting the top-line and margin growth, as we see improved NSR per unit case in Nigeria and growing FX-neutral revenue per case in Developing driving a further 60bps EBIT margin growth to 10.6%. Overall, on our 2018/20E revenue and EBITDA figures, we expect CCHBC to deliver 5% and 10% CAGRs, respectively. However, in the bottling space, we still prefer Coca-Cola Içecek (CCI), which is both the fastest-growing bottler in the world (8.4% FX-neutral revenue CAGR for 2018/20E) and remains the cheapest (34% and 43% discounts on 2018/19E consensus EV/EBITDAs) vs. its bottling peers.Coca-Cola Hellenic Bottling Co. produces, sells and distributes an extensive portfolio of non-alcoholic ready-to-drink beverages. Co.'s business is engaged in producing, selling and distributing non-alcoholic ready-to-drink beverages under bottlers' agreements with The Coca-Cola Company. In some Territories, Co. also produces, sells, distributes and markets its own brands of juice and Water beverages. In addition, Co. bottles and distributes beer in Bulgaria and Former Yugoslav Republic of Macedonia and Co. distributes a selected number of third party premium spirit brands in certain central and eastern European operations.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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