Current Price: ~ $45/share
Projected Yield: ~ 2.91%
Molson Coors is one of the largest brewers in the world. Major brands include Coors Light, Molson Canadian, Carling, Miller Lite, Keystone, Blue Moon and Leinenkugel's. Its largest markets include Canada, the United States, and the United Kingdom. Molson Coors retains 40% share of the Canadian beer market, 29% of the U.S. beer market (via its MillerCoors joint venture with SABMiller), and 19% of the U.K. beer market.
Estimated WACC for the firm today is 7.82% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year

FCF
$Millions

2002

19

2003

304

2004

288

2005

16

2006

387

2007

188

2008

181

2009

700

2010

572

2011

633

CAGR FCF ex2002: ~ 10%
Consensus Forecast Industry 5Year Growth: ~ 13% per year
Consensus Forecast Company 5Year Growth: ~ 7% per year
Internal Growth Rate: ~ 4%
Sustainable Growth Rate: ~ 6%
Scenario 1
 Start at $633 million FCF
 Assume a 5year growth rate in FCF of 7% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future cash flows, discounted at a WACC of 7.82%, give a present value for the entire firm (Debt + Equity) of $11426 million. If the firm's fair value of debt is estimated at $2178 million, then the fair value of the firm's equity could be $9248 million. $9248 million / 181 million outstanding shares is approximately $51 per share and a 20% margin of safety is $41/share.
Year

FCF
$Millions

0

633

1

677

2

725

3

775

4

830

5

888

Terminal
Value

12143

The firm's future cash flows, discounted at a WACC of 7.82%, give a present value for the entire firm (Debt + Equity) of $11426 million. If the firm's fair value of debt is estimated at $2178 million, then the fair value of the firm's equity could be $9248 million. $9248 million / 181 million outstanding shares is approximately $51 per share and a 20% margin of safety is $41/share.
Scenario 2
All else being equal,
All else being equal,
 Assume a 5year growth rate in FCF of 7% per year, then 1% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

633

1

677

2

725

3

775

4

830

5

888

Terminal
Value

13923

 Present Value of the entire firm (Debt + Equity): $12647 million
 Value of Equity: $10469 million or $58/share
 20% margin of safety is $46/share
Scenario 3
All else being equal,
 Discount the firm's future FCFs at 9%
 Assume a 5year growth rate in FCF of 7% per year, then 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

633

1

677

2

725

3

775

4

830

5

888

Terminal
Value

10555

 Present Value of the entire firm (Debt + Equity): $9855 million
 Value of Equity: $7677 million or $42/share
 20% margin of safety is $34/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
No comments:
Post a Comment