Thursday, October 3, 2013

Molson Coors Canada

On my other blog I am today writing about my friend's art show called Transformations 2013 starting tomorrow on October 4, 2013 ...continue...

I do not own this stock of Molson Coors Canada (TSX-TPX.A, NYSE-TAP). In 2008 I did a spreadsheet on this stock as it has recently been recommended and generally, beer companies make good money. Labatt's was one original companies that I purchased and I did very well with it before it was bought out.

First let's talk about dividends. This stock has a reasonable dividend which is currently at 2.54% (on a stock price of $51.96). The increases in dividends are also reasonable with 5 and 10 year growth at 15% and 9.3% per year in CDN$ and at 14.9% and 12% per year in US$.

The last dividend increase was in 2011 and was for 14.3%. There was no dividend increase in 2012 and so, far no dividend increase in 2013 with 3 dividends for 2013 already being paid. The company has increased the dividends over the years, but increases have been inconsistent and they have been level over a number of years in the past.

The Dividend Payout Ratios are good with the 5 year median DPR for earnings at 35% and for cash flow at 21%. The DPRs for 2012 were higher at 53% for earnings and 27% for cash flow. They are expected to be lower in 2013 at approximately at 32% for earnings and 37% for cash flow. (Note the ratio are the same in CDN$ and US$.)

For Canadian stockholders, the total returns over the past 5 and 10 years have not been great with 5 year total returns a negative 1.25% per year with 2.33% per year from dividends and a capital loss of 3.57% per year. The 10 years returns are better but at just 1.86% per year with 3.18% per year from dividends and a capital loss of 1.32% per year.

I am taking values from the Molson Inc. (TSX-MOL.A) to this company to determine Canadian Shareholders' return. Molson and Coors amalgamated in 2005. American shareholders from Coors have done better, but their total return is not great either.

The company has an odd structure with Class A Common Shares and Class B Common Shares. There are also Exchangeable Shares of these two classes for old Molson Inc. shareholders on the TSX so that Canadian Shareholders did not have to pay capital gains on the amalgamation of Molson and Coors in 2005. All shares have currently one vote. Analysts tend to classify this stock as an American stock and few Canadian analysts follow this stock.

Outstanding shares have increase by 1% and 7.5% per year over the past 5 and 10 years. Since Amalgamation, the exchange shares have decreased as they have converted to common shares on the NYSE. No matter how you look at this company, Revenue has been declining over the past 5 and 10 years. The earnings and cash flow have been increasing if you look at 5 year running averages. Both earnings and cash flows tend to be volatile so if you look at exactly 5 and 10 years ago, you do not see much progress.

Looking at 5 year running averages, the earnings in CDN$ has increased by 8.3% per year and 7.8% per year over the past 5 and 10 years. Also looking at 5 year running averages, the cash flow per share in CDN$ has increased by 5.4% and 9.2% per year over the past 5 and 10 years.

For Revenues per share, these have declined in CDN$ by 10% per year over the past 5 and 10 years. For Revenues per Share, if we look at 5 year running averages, the decline is not better with the decline at 16% and 8% per year over the past 5 and 10 years. These figures are a bit better in US$ terms with the decline in Revenue per Share using the 5 year running averages at 13% and 4% per year over the past 5 and 10 years.

The Return on Equity is currently not great but has never been. The ROE for 2012 is just 5.5% and the 5 year median ROE is a bit better at 8.8%. What is desirable is ROEs at 10% or higher. For 2012, the ROE on comprehensive income is better at 7.4%, but the 3 year ROE is the same.

The Liquidity Ratios have never been particularly good on this stock and the current one is at 0.71. This means that the current assets cannot cover the current liabilities. However, if you exclude the current portion of the long term debt, the ratio goes to 1.26. If you look at the addition of cash flow excluding dividends the ratio goes to 1.51.

The Debt Ratios has always been quite good and it is currently at 1.99. The current Leverage and Debt/Equity Ratios are fine at 2.01 and 1.01 respectively.

I worry about the decline in revenues. Analysts expect a big decline in revenues in 2013 (by 23%) but if you look at Revenues over the past year ending in the second quarter of 2013, revenues are up by 7%. The ROEs are rather low also.

Beer companies or at least this one does not seem to be much of a money maker. Perhaps this is because of all the competition from small brewing companies. See my spreadsheet at tpx.htm.

This is the first of two parts. Second part will be posted on Friday, October 4, 2013 and will be here.

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. Its web site is here Molson Coors.

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 or StockTwits.

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