Embotelladora (AKO,B) means bottler in Spanish. This is a Coca Cola Bottler based in Chile.
It has a A and a B share which is more liquid.
Analysts Estimate around 1.28 and 1.41$ of EPS in 2022 and 2023.
The stock price is today 13.4$. No need to do much maths to know that it is cheap.
My blog and my portfolio is not to contradict analyst estimates or find the 1 hidden element that will change the course of a company. I just go where the money flows are dried up. Analysts know it is undervalued. Flows just aren't here to buy them.
So, AKO is a bottler.
Territories are:
7.3m people in Paraguay
9.9m people in Chile incl Santiago, the capital.
13.9m people in Argentina incl half of Buenos Aires
23.5m people in Brazil incl Rio and parts of Sao Paulo.
Due to habits and disposable income, volume is highest in Brazil (265m), but Chile is right behind (236m) and Argentina is behind Chile (166m), and Paraguay is small (66m).
76% of the volume is soft drinks, the rest is Juice, Water, beer distribution.
Past 5 years revenue and volume is down a bit (2% CAGR) while profit is up 2% CAGR in Chilean Pesos. This is mostly due to Argentina tough economy and devaluation (very visible on the chart) as well as covid19.
EBITDA is 39% in Chile, 33% in Brazil, 15% in Argentina and 14% in Paraguay.
Some thoughts: if/when we get a rebound in these economies, we can expect customers in the poorer nations than Chile to drink more volume and grow slowly towards the Chile consumption rates. We can expect the profitability in Argentina to increase.
FCF is up nicely in the past years, showing better efficiency in the business.
The company is paying a growing quarterly dividend of about 7%, the really negative part is an important witholding tax at 35%, depending where you reside it could be lowered. The ir website numbers the dividends and the last paid is called dividend 218, I like this.
Strategy:
-Organic growth with distribution agreements in Alcohol.
-Possible territories tuck in acquisitions, because the company is well capitalised.
How is this an inflation hedge? It is a play also on undervalued currencies in my opinion. These countries are commodity countries, mining in Chile, Agriculture and Oil in Argentina, and all of that in Brazil. A commodity induced inflation will reflect itself in the currency levels against EUR and USD, and will bring more disposable income for the workers of these industries and later the whole economy, allowing for more consumption.
If it does not happen? Well, you still get a decent earnings yield for a growing franchise.
It is not the most exciting business, but it is due for a large rerating to about 20 PE ratio, + eventually currency repricing.