Monday, February 7, 2011

Molson Coors Canada

The reason I started to follow Molson’s was that it was recommended as a good stock. Another thing is that I had the Labatt’s stock as one of my first. I bought it in 1983, but I was forced to sell it in 1995 when the company was bought out. Labatt’s had been a great stock. However, even though I have followed Molson’s, I never liked it well enough to buy it. Molson’s was bought out in 2005 by Coors and the company became Molson Coors Canada (TSX-TPX.B) in Canada and Molson Coors Brewing Company (NYSE-TAP) in US.

My spreadsheet and reviewing are basically from the view of Molson Inc (TSX-MOL.A) changing into Molson Coors Canada (TSX-TPX.B). Molson (MOL.A) reported in Canadian dollars and the new company is reporting in US dollars. So, I have used the applicable exchange rate on values reported from 2005. However, my US stuff is Adolph Coors Co (NYSE: RKY) changing into Molson Coors Brewing Company (NYSE-TAP). This last thing to mention is that there was some unhappiness about the Molson buyout and that is the reason for the special Molson dividend of $5.44 in 2005.

The questions is, being a Canadian investor in Molson, would you have made any money over the past 5 and 10 years. The answer to that is yes. The 5 and 10 year total return would be about 8% and 17% per year, respectively. This stock has had some trouble with the recent recession as a lot of companies have had. The dividend portion of these total returns would have been 2% and 5% per year respectively. The 10 year is high also because it includes the special dividend.

There is another thing I want to mention concerning the dividends. Since the dividends are paid in US$, each dividend would fluctuate in the amount paid in CDN$. This can make things for difficult for Canadian investors because you never know the exact amount of your dividend until it is paid and translated into CDN$.

For both Canadian and US investors, the growth in earnings and cash flow has been good. US investors have had a better growth in Dividends as the Coors dividends seem to have started at a lower rate. What has been low growth for both Canadian and US investors is the growth in book value. For Canadians book value has grown at a rate of less than 2% per year and the US book value growth is not much better.

The real problem is the lack of growth in revenues. Revenues have been coming down since hitting a peak in 2008. It looks like the revenues might grow modestly in 2010 and this is hopeful.

One good indicator is the Liquidity Ratio. For the 3rd quarter of 2010, this ratio is 1.53. This is what I like to see. However, in the past, the Liquidity Ratio has been much lower and it has a 5 year average of just 0.95, although it has been over 1.00 since 2007. A Liquidity Ratio of 1.00 says that the company’s current assets equal its current liabilities. You want a better margin than that. The Asset/Liability Ratio has always been better and it is currently at 2.68.

The last thing to mention is the Return on Equity. For the financial year ending in 2009, the ROE was 10.2% and for the 12 months ending in September 2010, it was again at 10.2%. This is a good ROE. However, the 5 year average is a bit lower, but still at an acceptable level at 8.9%.

Tomorrow, I will look at what the analysts are saying about this stock and what my spreadsheet is saying about the current price. I must admit, there is not much coverage in Canada and this company seems to be looked on as an American company.

Molson Coors Brewing Company is a leading global brewer delivering extraordinary brands that delight the world's beer drinkers. It brews, markets and sells a portfolio of leading premium brands such as Coors Light, Molson Canadian, Carling, Blue Moon, and Keystone Light across North America, Europe and Asia. It operates in Canada through Molson Coors Canada; in the US through MillerCoors; and in the U.K. and Ireland through Molson Coors UK. Under the US stock exchange, this company is called Molson Coors Brewing Co. Its web site is here Molson Coors. See my spreadsheet at tpx.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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