Coca Cola HBC AG

Coca Cola HBC (Hellenic Bottling Company) AG (LON: CCH) is a Switzerland based company engaged in the business of production and distribution of non-alcoholic beverages. The company is a bottler of Coca Cola Products. The company distributes Coca-Cola, Coca-Cola Zero, Coca-Cola Light, Fanta, and Sprite as well as water, energy drinks and juice. For the Coca-Cola company, it is one of the largest bottlers. The company is operating in 28 countries, have 615 million potential consumers across three continents, and also have 197 brands in the diverse portfolio.

On 7^th May 2020, the company will announce its Q1 trading update for 2020.

Financial Highlights (for the full year ended 31^st December 2019, € million)

(Source: Results, Company Website)

For the full year 2019, the company’s volume increased by 3.3% to 2,264.5 million-unit casesas compared with the previous year. On a reported basis, the net sales revenue increased by 5.5% to €7,026 million in FY19 against the last year (FY18: €6,657.1 million), benefiting from a 1.1 percentage point positive impact from currency movements in the Swiss Franc and Russian Rouble against the Euro. Led by the movement of the Nigerian Naira and the Russian Rouble against the US Dollar, the adverse impact from foreign currency movements stood at €7.0 million in the current period. In the full year 2019, all market segments delivered growth in FX-neutral revenue, but the discontinuation of Lavazza had a negative impact of 20 basis points on 2019 full-year growth. The EBIT margin for the financial year 2019 stood at 10.2%, an increase of 60bps from the previous year (FY18: 9.6%). In FY19, the net profit and basic earnings per share were reported at €487.5 million and €1.340, respectively. The company has generated a decent free cash flow of €442.6 million in FY19, an increase of 19.6% against the prior year (FY18: €370 million). The Board of the group recommends an ordinary dividend per share of €0.62.

Share Price Performance

Daily Chart as at February-14-20, before the market closed (Source: Thomson Reuters)

Coca Cola HBC AG shares were trading at GBX 2,897 at the time of writing before the market close (at 8:15 AM GMT) on 14^th February 2020 and were up by 0.49% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,950.00/GBX 2,296.00. The group’s stock is reflecting the lower volatility as against the benchmark index based on the company’s beta of 0.68.

Valuation Methodology

*Peers: Britvic PLC, A.G.Barr PLC, Nichols PLC, Diageo PLC, and Fevertree Drinks PLC

Conclusion
As per the results or external forecast for 2020, the economic outlook in the territories continues to be decent. In all three segments, the company anticipate volume to continue to grow at a decent level. Overall, the company would deliver a decent performance in 2020. In 2019, the Established and Developing segment was impacted by poor summer. However, there are some challenges and risks which could affect the overall business of the company. Failure to adapt to changing consumer health trends could impact the revenue of the company. Adverse weather conditions could decline the sales of the company. Risk of cybersecurity and a critical data breach could affect the operations and hamper the reputation of the company. Fluctuations in commodity prices and foreign exchange rates could affect the profitability of the company. The Group’s activities also expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and commodity price risk), credit risk, liquidity risk and capital risk. Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level.

Based on the above rationale, risks faced by the company and valuation done using the above methodology, we have given a “Watch” recommendation at the current price of GBX 2,897 (as on February 14, 2020, before the market close), while we look for the growth catalysts in the near-term.

Whitbread PLC

Whitbread PLC (WTB) is a Dunstable, the United Kingdom-headquartered leading hotel operator in the country, which is the owner and operator of Premier Inn. It is one of the most successful hospitality brands in the United Kingdom. The company aims to be the best budget hotel business in the world, and along with hotels in the Middle East, and Germany.

Recent News
On 12^th February 2020,the company has a major milestone for Premier Inn as it surpasses one thousand hotel rooms in Ireland and also appoints new development manager.

Trading Update for the Third Quarter of the Financial year 2020
The UK and international sales for the third quarter of 2020 increased by 1%(0.3% on a YTD basis), in spite of challenging market sentiments in the United Kingdom. In the UK market, the company’s sales from accommodation division declined by 0.4% and 2.1% on LFL (like-for-like) basis in the current trading period, driven by the weak market conditions in the regions.

The group extended its capacity expansion in the UK while achieving higher occupancy of more than 80%. As per the management of the company, the performance of the company’s hotels in Frankfurt, Hamburg and Munich was satisfactory.

Share Price Performance

Daily Chart as at February-14-20, before the market closed (Source: Thomson Reuters)

Whitbread PLC shares were trading at GBX 4,791 at the time of writing before the market close (at 9:30 AM GMT) on 14^th February 2020 and were down by 0.602% versus the previous day closing price. Stock 52 weeks High and Low are GBX 5,194.00/GBX 3,927.00. The group’s stock is reflecting the lower volatility as against the benchmark index based on the company’s beta of 0.94.

Conclusion
The company is also looking for more sites across Dublin and in key markets across Ireland. In Q3 FY19, the company’s Premier Inn’s total accommodation sales dipped due to lack of consumer confidence and weak business impacting the UK hotel market and offset by the tougher London market, as well as the new capacity of more than 1,000 rooms added over the previous year.

The United Kingdom economic and political environment stays uncertain, and the sustained industry inflation continues. However, PM Johnson’s victory in December 2019 could boost business confidence and break political and economic impasses, which could be beneficial for the group as well.

Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level.In the future, environmental regulations, foreign exchange risks and expansion by competitors could affect its business operations.

Based on the above rationale, and risks faced by the company, we have given a “Watch” recommendation at the closing price of GBX 4,820 (as on February 13, 2020), while we look for the growth catalysts in the near-term.
 
*All forecasted figures and Peer information have been taken from Thomson Reuters. Currency exchange rate taken for 1 EUR = 0.830393 GBP.

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