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Dividend Portfolio: Coca-Cola Amatil (ASX: CCL)

Published 07-DEC-2017 00:00 A.M.


2 minute read

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Overview: Coca-Cola Amatil Limited ("Coca-Cola Amatil", "the Company") is an Australian diversified consumer company focused on beverages. The Company manufactures and distributes carbonated soft drinks, water, sports and energy drinks, fruit juice, flavoured milk, coffee, and packaged ready-to-eat fruit and vegetable products. Coca-Cola Amatil is the principle licensee of the Coca-Cola brand in Australia and also operates in New Zealand, Fiji, Indonesia, Papua New Guinea, and Samoa.

Catalysts: After a period of sustained underperformance Coca-Cola Amatil’s share price is trading ~50% below its peak and the valuation appears undemanding in light of the Company’s balance sheet strength, recent operational improvements, and somewhat defensive business model. A mix of capital management initiatives and a rebalancing of the Company’s product portfolio has the potential to drive earnings growth.

Hurdles: Revenues and earnings have been volatile over the past five years and there is a risk that the Company’s financial performance may continue to decline. Coca-Cola Amatil has invested heavily in capacity and operations and there is no guarantee that this will yield a return on shareholder funds. Operating in a number of foreign jurisdictions across Asia-Pacific, the Company may be subject to regulatory hurdles.

Investment View: Coca-Cola Amatil offers profitable exposure to demand for beverages in Australasia. We are attracted to the Company’s balance sheet, defensive business model, and potential to return to earnings growth. Risks include ongoing erosion of sales and earnings, unfavourable consumer trends, and regulatory hurdles. After a period of sustained share price weakness, we believe that recent hurdles have been largely factored into the share price and we see reasonable value growth potential given the risks. Coca-Cola Amatil’s valuation appears undemanding as we initiate coverage with a ‘buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

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