¡@2006

Anheuser-Busch Companies, Inc (BUD)

On 17^th June, 2006

Current Price                          $45.52

Current P/E                              19.40              

Current EPS(diluted)          $2.35              

Market Capitalization        $35.18Bil

I) Fundamental Analysis

A) Quantity Analysis

1) Earning Ability

Year	Sales	Net income	EPS	ROE(%)	Equity	D./EPS(%)	Dividend	Avg P/E	Shares outstanding(mil)
12/96	10883.7	1156.1	1.14	29.5	3919.0			17.00	994.7
12/97	11066.2	1179.2	1.18	29.2	4038.4			18.40	974.0
12/98	11245.8	1233.3	1.27	29.3	4209.2			21.90	953.2
12/99	11703.7	1402.2	1.47	35.8	3916.7			25.20	922.2
12/00	12261.8	1551.6	1.69	37.6	4126.6			22.80	903.6
12/01	12911.5	1704.5	1.89	42	4061.5	36.5	0.69	22.10	879.1
12/02	13566.4	1933.8	2.20	63.4	3052.3	34.1	0.75	22.40	846.6
12/03	14146.7	2075.9	2.48	76.6	2711.7	33.5	0.83	19.80	813.1
12/04	14934.2	2240.3	2.77	84	2668.1	33.6	0.93	18.80	785.0
12/05	15035.7	1839.2	2.35	55	3343.3	43.8	1.03	19.50	777.7
Method #1	Stock price est			48.24	X0.30	36.3		20.79	Below are all estimated #
12/06	56.34	2108.4	2.71		4370.66		0.98		777.7
12/07	73.6	2756.2	3.54		5713.51		1.29		777.7
12/08	95.84	3583.1	4.61		7427.56		1.67		777.7
12/09	124.53	4658.0	5.99		9655.83		2.17		777.7
12/10	161.95	6055.4	7.79		12552.58		2.83		777.7
12/11	210.39	7872.0	10.12		16318.35		3.67		777.7
12/12	273.6	10233.6	13.16		21213.86		4.78		777.7
12/13	355.72	13303.6	17.11		27578.01		6.21		777.7
12/14	462.37	17294.7	22.24		35851.41		8.07		777.7
12/15	602.29	22483.1	28.97		46606.84		10.52		777.7
Method #2	S.price Est 1)	1)EPS	S.P. Est 2)	2)EPS	E.Growth Rate(%)	1)7.5 2)9.73	1)Dividend	2)Dividend	S.p.est. P/E 17	S.p.est P/E 25
12/06	52.6	2.53	53.64	2.58			0.92	0.94	43.01	64.5
12/07	56.55	2.72	58.84	2.83			0.99	1.03	46.24	70.75
12/08	60.71	2.92	64.45	3.10			1.06	1.13	49.64	77.5
12/09	65.28	3.14	70.89	3.41			1.14	1.24	53.38	85.25
12/10	70.14	3.37	77.75	3.74			1.22	1.36	57.29	93.5
						Total D.	5.33	5.7
12/11	75.47	3.63	85.24	4.10			1.32	1.49	61.71	102.5
12/12	81.08	3.90	93.56	4.50			1.42	1.63	66.3	112.5
12/13	87.11	4.19	102.7	4.94			1.52	1.79	71.23	123.5
12/14	93.76	4.51	112.68	5.42			1.64	1.97	76.67	135.5
12/15	100.69	4.84	123.7	5.95			1.76	2.16	82.28	148.75
						Total D.	12.99	14.74
12/16	108.32	5.21	135.76	6.53			1.89	2.37	88.57	163.25
12/17	116.42	5.60	148.86	7.16			2.03	2.6	95.2	179
12/18	125.16	6.02	163.41	7.86			2.19	2.85	102.34	196.5
12/19	134.51	6.47	179.21	8.62			2.35	3.13	109.99	215.5
12/20	144.56	6.95	196.7	9.46			2.52	3.43	118.15	236.5
						Total D.	23.97	29.12

 

--Earnings Per Share ¡V Quarterly Results

	FY(12/06)	FY(12/05)	FY(12/04)
1st Quarter	$0.64	$0.65	$0.67
2nd Quarter	NA	$0.78	$0.83
3rd Quarter	NA	$0.66	$0.85
4th Quarter	NA	$0.26	$0.42
Total	$0.64	$2.35	$2.77

 

--Stock split since issued on exchange for Anheuser-Busch Companies, Inc:

Date split declared	Shareholder of record date	Split date	Split ratio
7/26/2000	8/17/2000	9/18/2000	2-for-1
7/24/1996	8/15/1996	9/12/1996	2-for-1
7/23/1986	8/15/1986	9/12/1986	2-for-1
4/24/1985	5/17/1985	6/14/1985	3-for-1

(The earning estimation is not adjusted by this, thus the return should be more than calculated above for method #2)

 

2) Financial Stability

The company¡¦s current financial status is very healthy, most of the cash from financial activities spent on paying dividend and repurchasing own stocks, about 27.7% of the cash from financial activities was used to repay debt.

$2727.8Millions net cash income from operating activities in 12/2005, comparing with $2940.3Millions net cash income from operating activities in 12/2004, 7.23% negative growth. It is mainly due to the increasing cost and slow down of sales but still have postive growth of total sales.

1.01% decrease in Cash & Equivalents, 2.11% decrease in Receivables, 5.19% decrease in Inventories, decrease rate of inventories is a lot higher than cash and receivables and decrease rate of receivables doubles that of cash, this is a very good result.

Total liabilities decreases 2.18% while Total asset increases 2.36%. Intangibles increases 3.41%, a little bit higher than the increase rate of total asset but Intangibles is only 8.33% of total asset, thus no deeper research in intangibles is needed. Accum. Depreciation increases 7.03% and it¡¦s 61.96% of total asset. We¡¦re happy to see such healthy result.

-Loan repay ability: 

Adjusted Long term dept = Total liability¡Vdeferred income tax- equity-current asset+inventory = $(16555 ¡V 1682.4 - 3343.3 ¡V 1758.7 + 654.5) = $10425.1

Years needed to repay all depts. = Adjusted Long term dept / current earning=

$(10425.1 / 1839.2) = 5.67 years

 

-Financial Condition

	Company	Industry	S&P 500
Debt/Equity Ratio	2.14	0.58	1.14
Current Ratio	0.9	1.2	1.4
Quick Ratio	0.5	0.7	0.9
Interest Coverage	7.1	6.1	3.2
Leverage Ratio	4.5	2.4	5.8
Book value/Share	4.92	10.72	13.84

 

3) Management Efficiency

	BUD	Industry	S&P 500
Income/Employee	58,000	38,000	32,000
Revenue/Employee	484,000	362,000	374,000
Receivable Turnover	17.0	10.7	8.0
Inventory Turnover	12.0	6.2	8.1
Asset Turnover	0.9	0.8	0.3

 

4) Price ratio

	Company	Industry	S&P 500
Current P/E ratio	19.5	20.7	17.3
P/E Ratio 5yr high	25.0	40.8	64.8
P/E Ratio 5yr low	17.1	15.2	16.5
Price/Sales Ratio	2.31	2.24	1.43
Price/Book Value	9.25	3.80	2.71
Price/Cash Flow Ratio	12.50	14.00	11.70

 

B) Quality Analysis

Anheuser-Busch Companies, Inc. (Anheuser-Busch) is the holding company parent of Anheuser-Busch, Incorporated (ABI), a beer brewer. The Company is also the parent corporation to a number of subsidiaries that conduct various other business operations.

International Equity Investments:

Anheuser-Busch owns a 35.12% direct interest in Grupo Modelo, S.A. de C.V.(Modelo), Mexico¡¦s largest brewer and producer of the Corona brand, and a 23.25% direct interest in Modelo¡¦s operating subsidiary Diblo, S.A. de C.V.(Diblo). The company¡¦s direct investments in Modelo and Diblo give Anheuser-Busch an effive 50.2% equity interest in Diblo.Total cost of this was $1.6billion. It has the net current asset of $2166.7mil, non current liabilities of $411.mil3 and non current assets of $4592.8mil.Net income of $966.8mil, $788.1mil, and $651.0mil in 2005, 2004, 2003, respectively.

In April 2005, Anheuser-Busch¡¦s economic ownership in Tsingtao is 27%, voting stake is 20%. Total investment was $211million, carrying value of the company¡¦s Tsingtao investment was $224.8 million at Dec 31^st, 2005. Dividends paid by Tsingtao totalled $6.5million in 2005.

In 2001, the company purchased 20% equity interest in Compania Cervecerias Unidas S.A. (CCU), the largest brewer in Chile, for $321 million which it accounted for using the equity method. But all 20% was sold in Nov 2004, and recognized a pretax gain of $13.4million and was accounted in the income statement.

The 100% of Harbin was purchased by the company in July 2004, which is the fifth largest brewer in China. The cost of $693.8 million was paid for one billion outstanding shares, which is 100% of Harbin. In which, most of  $118.4 long term debt is needed to pay in 2005, maturities of the rest is ranging from 2005 through 2009. Negative $56.7million working capital and goodwill of $648.1 non-deductible for tax purpose for Harbin.

The revenue of the company is mainly consisted of four segments: Domestic beer, International beer, Packaging, and Entertainment. In 2005, domestic beer contributed 75.8%, International beer contributed 6.4%, Packaging contributed 10.4%, and Entertainment contributed 7.4% of total net sales, during the year ended Dec 31^st 2005.

Approximately 94% of the Company's net sales are generated in the United States. Worldwide sales of the Company's beer brands aggregated 121.9 million barrels in 2005, which is comprised of domestic and international volume. International volume represents Anheuser-Busch brands produced overseas by Company-owned breweries, under license and contract brewing agreements, plus exports from the Company's United States breweries to markets around the world.

Domestic beer is decreasing but still of huge percentage of the company¡¦s sales. Negative growth in domestic beer is noted. $13067.6million, $13388.5million, and $13017.1million sales were noted in 2005, 2004, and 2003, respectively. $17253.5, $17160.2, and $16320.2 total sales of the company were noted in 2005, 2004, and 2003, respectively. Domestic beer has 76%, 78%, and 80% of the total sales of the company in 2005, 2004, and 2003, respectively.

Potential of China market is huge, and the company has been working on it since the acquisition of Harbin and Tsingtao. Total of $904.8 was invested. Total beer shipments measured of China is even more that of US in 2003. Combine that of China and US is over 30% of the world market. Total beer volume sold in 2004 is 16.2millions of Hectoliters and in 2003, it was just 9.9millions of Hectoliters.

The company operates 14 breweries, 12 in the United States and 2 overseas. The company currently brews approximately 30 beers for sale in US. They are in the following:

-The Budweiser Family: Budweiser(1876), Budweiser select(2004), Bud light(1982), Bud ice light(1994)

-Michelob Family: Michelob lager(1896), Michelob Light(1978), Michelob Ultra(2002), Michelob ultra amber(2005), Michelob Amberbock(1995), Michelob Honey Lager(1997), Michelob Golden Draft(1991), Michelob Golden draft light(1991)

-Specialty Beers: B.E.(2004), Bare Knuckle stout(2003), Anheuser world lager(2003), Tilt(2005), Tequiza(1997), Ziegenbock, Ziegenbock amber(2005).

-Nonalcohol brews: O¡¦doul¡¦s(1989), O¡¦doul¡¦s amber(1998), Busch NA(1994).

-Busch Family: Busch beer(1955), Busch light(1989), Busch ice(1995).

-Natural Family: Natural light(1977), Natural ice, Natty up(2005).

-Malt Liquors: Hurricane malt liquor(1995), Hurricane ice(1997), Hurricane high gravity(2005), King Cobra(1984).

-Specialty Beverages: Spykes(2005), Bacardi silver(2002-2006).

-Alliance Partner Products: Red hook esb(1987), Hefeweizen(1984).

-Imports: Harbin(2006)

-180 Family: 180 energy drink(2001), 180 sport(2002).

The company is one of the largest US manufacturers of aluminium beverage containers and the world¡¦s largest recycler of aluminium beverage containers.

Some theme parks, playlands are also under the company¡¦s entertainment corporation such as Busch Entertainment corporation, Seaworld orlando, Busch Gardens Tampa Bay, Adventure island,etc..

Anheuser-Busch Inc. is ranked number 1 brewer in the world, which shares 10.7% of the world beer market in 2003 while the second, SABMiller PLC, shares 9.3%.The company also has the most shipments of 129.8millions of barrels in 2003.

Anheuser-Busch Inc. has 3 beer brands ranked in top 20 in the world, they are Budweiser, Bud Light, and Natural Light, ranking 1^st, 2^nd, and 17^th, respectively.

Repurchasing stocks every year, this is a very good habit. 12.9millions treasury stock was acquired in 2005, the accumulative treasury stock has been 690.9million shares. Net common stock outstanding becomes 777.7millions shares in 2005.

In brief, a top brewer which has monopolistic consumable products. Its price of products could also be adjusted according to inflation. The company has conservative financial policy, good treatment to employees, good management efficiency, and very good earning power.

 

II) Technical Analysis

¡@

 

¡@

  Back to other articles

Roy   17^th June, 2006