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Documente Cultură
Market Profile
Last Price
52W Price Range
Share Outstanding (M)
Dividend
Dividend Yield
5Yr Dividend Growth
311
265-314
6,872
6,25
2,01%
17,84%
Valuation Profile
EV/EBITDA TTM
EV/EBITDA 15
P/E
7.5X
6.8X
17.38X
P/E 15
16.8X
5 Yrs Average PE
13.26X
5 Yrs High PE
25.05X
5 Yrs Low PE
6.49X
34.50
BONGRAIN
13.8
MONDELEZ
8.8
FBEL
6.2
EMMI SW
-9.9
18.6
20
14.4
15
EV/EBITDA 15 10
6.5
8
4.7
5
0
15
17
19
21
23
25
27
29
31
33
P/E 15
300
250
200
150
FROMAGERIE BEL
100
39
81
39 5
89
39 2
96
40 9
04
40 6
12
40 3
20
40 0
27
40 7
35
40 4
43
40 1
50
40 8
58
40 5
66
40 2
73
40 9
81
40 6
89
40 3
97
41 0
04
41 7
12
41 4
20
41 1
27
41 8
35
41 5
43
41 2
50
41 9
58
41 6
66
41 3
74
41 0
81
41 7
89
41 4
97
42 1
04
42 8
12
5
50
Contents
Business Description................................................................................................................... 3
Industry Overview....................................................................................................................... 4
Competitive Positioning............................................................................................................. 5
Financial Statement Analysis.................................................................................................... 6
Valuation....................................................................................................................................... 7
Appendix 1: Multiple Valuation and Target Price.............................................................................9
Appendix 2: Discounted Cash-Flow (Bloomberg Template)...........................................................10
Appendix 3: Milk Price Estimation................................................................................................. 13
Appendix 4: COGS Analysis and Forecast...................................................................................... 14
Appendix 6: Shareholder Structure and Corporate Management..................................................15
Appendix 7: Historical Income Statement..................................................................................... 16
Appendix 8: Projected Income Statement..................................................................................... 17
Appendix 9: Historical Balance Sheet........................................................................................... 18
Appendix 10: Projected Balance Sheet......................................................................................... 19
Appendix 11: Financial Analysis Ratios......................................................................................... 20
Appendix 12 : Graphics (Bloomberg Terminal).............................................................................. 21
Appendix 13: Industry Valuation................................................................................................... 22
Appendix 14: Inflation and GDP Forecast Charts...........................................................................23
Appendix 15: Cheese Consumption by Region.............................................................................. 24
Business Description
Exhibit 1: 5 brands generate 70% of sales
Company Strategies
The companys strategic direction focuses on the following points:
22.9%
22.5%
22.5%
21.9%
22.0%
21.4%
21.5%
21.1%
21.4%
21.0%
20.5%
20.0%
2009
2010
2011
2012
2013
2014
Source: Bloomberg
West Europe
East Europe
40%
30%
20%
America
The development and creation of new products benefit the group through
revenue sales growth and scale economy through operational leverage.
Specific snacks products have higher market price premium than classical
cheese. Nevertheless, we flag some inconsistence between the management
discussion part from the annual report and the actual level of expenditures for
R&D.
10%
0%
2009
2010
2011
2012
2013
2014
West Europe
20%
Rest of the World
America
-20%
2009
2010
Source : Bloomberg
2011
East Europe
40%
0%
2012
2013
2014
Industry Overview
Exhibit 1: European Cheese Consumption Growth
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
Actual:
Our overall analysis reveals that USA cheese consumption is decreasing. Nevertheless, majors
actors such as Kraft Food experienced upward growth in US Cheese Sales, which we can
interpret that this trend is due to market share gain instead of total growth increase. On the
other side, South America experienced positive growth in the cheese consumption.
Inflation, GDP and consumption forecast:
Inflation is expected to increase to 1.70% in 2015 and 2.60% in 2016. South America inflation
is forecasted at 10% in 2015, but will decrease progressively in 2016-2017 to 6.10%. The GDP
on this area is expected to increase to 3% in 2017 from 0.59 forecasted in 2015.
We believe that South America is a key area growth driver that exporters need to target. With
a lower inflation expected in 2017, the downward dynamic of it and the positive growth trend
in GDP, the consumption will increase and dairy product such as cheese will benefit from
economic expansion.
Source: Bloomberg
8.20%
Competitive Positioning
Mondelez
The cheese industry is include into dairy industry products. The high number
of small companies makes this market very fragmented. We defined our
major peers for FBEL as MONDELEZ, KRAFT, AND BONGRAIN, (GLANBIA and
EMMI SG are used in our relative valuation due to the recent event with
Kraft, merger with Heinz)
24.91%
Kraft
59.50%
Bongrain
BEL
0%
20%
40%
60%
80%
100%
Source: Bloomberg
Revenue Growth %
2010
2011
O rganic Growth %
2012
2013
FBEL appears to be the only pure player listed company in the processed
cheese market.
Total cheese sales account for 100% of FBEL and except for Bongrain, total cheese
sales account for less than 25% in other groups.
Because the market is fragmented by a high number of private companies, we did not
have access to official market shares data. Instead we built our peer market share, and
compared each company sales in the cheese segment. We discover that KRAFT take up
some market share from the 3 others members of the group. BONGRAIN attracts our
attention and we define it as a serious competitor for FBEL. A recent press release
revealed that BONGRAIN is seriously engaged in internationalisation with its name
modification in order to gain foreign market shares. The total sales growth show a
cyclical and very volatile sector.
2014
Porters 5 Forces
Source: Bloomberg
40.0%
1200.0%
35.0%
1000.0%
30.0%
800.0%
25.0%
600.0%
Growth
Total Growth
Bongrain EUR
BEL EUR
Kraft USD
20.0%
400.0%
15.0%
200.0%
10.0%
Q4
0.0%
11
20
Q2
2010
2011
12
20
Q4
12
20
Q2
13
20
Q4
13
20
Q2
14
20
Q4
14
20
14.01
12.32
2009
Mondelez
USD
Market Share
by Group
2012
2013
2014
30.00
29.00
28.00
Activity Efficiency:
27.00
20
17
e
20
15
e
3
20
1
FY
20
11
FY
FY
20
09
26.00
The impact of inventory turnover downtrend alone is negative in our view, for the
performance of the firm. In overall, with the decreasing payables turnover, the impact on
cash collection cycle is attenuated.
14.00
12.00
10.00
8.00
6.00
4.00
2.00
20
17
e
20
15
e
3
FY
20
1
20
11
FY
FY
20
09
0.00
20
17
e
20
15
e
20
13
FY
20
11
FY
FY
20
09
6.00
FBEL appears to be more independent that its peers, Leverage used is less risky
Solvency ratios are under or in line with the industry trend. FBEL financial leverage of 2.17
published in the last annual results is reasonable compared to BONGRAIN at 3.14.
We expect the group to decrease the financial leverage due to high cash flow generation
and only two bonds actually outstanding. The first matures in December 2018 with total
amount of 20 Million and actually offers 2.75% coupon. The second matures in December
2019, total amount of 140 Million and actually offers 3% coupon rate.
Actually both bonds are trading at premium, the 2.75% 2018 trades at 106.68% to par and
the 3% 2019 at 108.03%. This premium price exchange reflects the financial strength and
credit quality of the group.
Valuation
Exhibit 1: Average 5Yrs Revenue Growth by
Geo Areas
er
ic
a
Am
Eu
ro
pe
W
es
t
Eu
ro
pe
Ea
st
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
We used the DCF (Discounted Cash Flow) Method to evaluate the fair value of BEL
stocks. We used the Bloomberg DCF Model available with the Bloomberg Terminal
which we believe will increase the correct price estimation. Relative to our inputs
and assumptions, the DCF model and Multiples models reveal a target price of
EUR324, equivalent to a 7% upside from the last current price of EUR300.
Source: Bloomberg
Revenue Growth
BELs core and only business deals with manufacturing and marketing of processed cheese.
Geographical exposition is well diversified accounting for 25% from Middle East and Africa
and 15% for America, we believe the exposure to geographical driver areas growth will
remain valid in the long term strategy due to the European fragmented and mature market.
The group will generate higher sales percentage at total in the short term from emerging
markets and America. The recent factory investment and development in South Dakota is a
strong sign that the group will switch Europe stagnation growth for North America high
volume and South America dynamic cheese sales (Industry Overview). We used the 5 years
average growth by region in order to forecast our total sales growth.
With our analysis, we expect the group to generate revenue growth geographical exposure
as follow:
190
170
150
70%
130
110
60%
90
70
50%
FY
FY
20
09
20
FY 10
20
FY 11
20
FY 12
20
FY 13
20
1
20 4
15
20 e
16
20 e
17
20 e
18
20 e
19
20 e
20
e
50
40%
West Europe
East Europe
America
30%
20%
10%
Exhibit 3: WACC evolution and leverage,
FBEL and BH FP
0%
2009
2010
2011
2012
2013
2014
8.00
7.00
6.00
WACC BEL
WACC BO NGRAIN
With the revenue average growth, and with our forecast of future revenue source structure,
we find an average growth rate of 6.85%. Over the 2009-2014 periods, the computed CAGR
(Compound Annual Growth Rate) reach 4.85%. The differential coming from the higher
exposition in the double digit growth areas, such as America and The Middle East and Africa
(Rest of the World above).
5.00
Leverage Bongrain
3.00
On average and relative to our milk price forecast and analysis, BEL will generate 30.22%
gross profit margin for the period 2015-2020. We believe that the recent collapse of milk
price is a short term trend and a strong rebound will be effective this year.
Capital Expenditures
39
84
40 3
02
40 5
20
40 7
38
40 9
57
40 4
75
40 3
93
41 9
12
41 1
30
41 5
48
41 6
67
41 0
85
42 1
03
4
2.00
For our analysis we used for the capital expenditures the average of the ratio CAPEX/SALES
of 3%. Nevertheless, due to our assumption for growth capture in the developing countries,
we expect the group to build new factories, especially in south America where we believe
the demand will be high in the coming years. We expect the CAPEX in 2016 and 2020 to be
sensibly higher than 3% of Sales at 6%.
WACC
We used the published WACC from the annual report of 7%. The Bloomberg WACC is in our
view too low relative to the risk of the company at 3.7%.
Price Multiples
2015
e
2016
e
2017
e
EV/EBITDA
peers
11,2x
10,3x
9,4x
Discount
-40%
-37%
-35%
6,7x
6,5x
6,1x
378
309
392
607
561
887
545,15
612,92
644,86
2604
1955
2626
377
283
381
EV/EBITDA
EBITDA
Cash And ST
Inv
Debt
Value of Equity
Target
Price
We used both EV/EBITDA and PE ratio for FBEL relative valuation. Our peer list include
BONGRAIN, MONDELEZ, GLANBIA and EMMI. We purposely excluded KRAFT from our
universe due to the recent merging events. The inclusion of the last would create upward
effect on our multiples and distort the correct valuation of FBEL
Analysis of historical PE relative to STOXX 600 FOOD AND BEVERAGE and to our peer list
clearly shows that FBEL trades at discount on both PE and EV/EBITDA. We noticed strong
valuation similarities between our peer group and the SX3P index.
Expectation on earnings with FBEL was in line with the publication as show the P/E evolution
on BEL for 2014. EV/EBITDA historical profile appears flat relative to its peers and the
benchmark.
Radar chart analysis of PE and EV/EBITDA valuation indicates that FBEL trades at discount
and growth potential, is in our view, not integrated in the stock valuation. With the pure
player we believe the stock will be better valuated in the medium term.
Our method suggests a target price of 329EUR, computed from 50% EV/EBITDA multiples
and 50% from P/E multiples.
30
20
18
25
16
14
20
12
15
SX3P Index
Average PE Peers
FBEL EV EBITDA
10
FBEL PE
8
6
10
39
81
39 5
92
40 7
03
40 9
15
40 1
26
40 3
37
40 5
48
40 7
59
40 9
71
40 1
82
40 3
93
41 5
04
41 7
15
41 9
27
41 1
38
41 3
49
41 5
60
41 7
71
41 9
83
41 1
94
42 3
05
5
39
81
39 5
92
40 7
03
40 9
15
40 1
26
40 3
37
40 5
48
40 7
59
40 9
71
40 1
82
40 3
93
41 5
04
41 7
15
41 9
27
41 1
38
41 3
49
41 5
60
41 7
71
41 9
83
41 1
94
42 3
05
5
20.0X
18.6X
18.0X
16.0X
14.4X
13.2X
13.2X
14.0X
EV/EBITDA
13.4X
12.1X
12.0X
10.0X
5 Yr Average Valuation
4.0X
10.0X
8.0X
6.7X
6.5X
8.0X
6.0X
2015 ES T Valuation
5.6X
5.8X
15.0X
4.7X
20.0X
25.0X
30.0X
35.0X
PE
Exhibit 6: PE and EV/EBITDA, average and forward 15 radar chart
Source: Bloomberg and Author Estimates
10
11
12
13
Source: Bloomberg
The chart clearly shows that MILKCL1M is oversold and will rebound quickly. Further analysis of the milk market cycle
reflects that a typical trend has an average length period of 3 years and never remains low during more than a year.
Classical correction of price never remains low for a long period. We performed the technical analysis of MILKCL1M
INDEX and extract the following conclusions:
14
2017
e
2018
e
2013
23
188
6
25
196
9
27
205
3
32
226
3
1898
1974
1923
2009
2094
2308
2223
3,66
%
1,94%
6,9%
201
5
6,9%
210
4
4,9%
215
3
4,9%
237
3
3,5% 2,0%
225
5 2394
2010
2011
2012
2013
2014
15
18
22
20
22
26
1542
1688
1843
1774
1831
1517
1663
1808
1830
1,59% -1,48%
1,85%
3,14
%
2015
e
2009
2019
e
2020
E
30
34
217
9 2347
2394
-1,54%
We estimated the COGS by making a regression from COGS to Revenue for the period 2009-2014. Then we found than
in average, the COGS released by the group were 1.54% lower than our prevision. With our analysis of milk price
presented on the previous page, we estimated the milk price for the forecast period (2015-2020).
Then we applied our regression values to the estimated milk price, with an adjustment for our DCF revenue growth
assumption and with our error of -1.54%.
1500.00
COGS FBEL
1000.00
500.00
0.00
10.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
26.00
28.00
15
Source: Bloomberg
Corporate Management
Clearly, the coming back of Antoine Fievet in the management (replacing Gerard Boivin) gave dynamism and strong
upward trend in the stock price of the group. The stock price increased by 230% since 2009 when Sir FIEVET took his
functions as CEO and Chairman of the Board.
Exhibit 2: Stock price performance since Sir Fievet integrates top management
Luc Luyten
James Lightburn
Michel Arnaud
Florian Sauvin
Fatine Layt
16
The composition of the board reflect the turning point of FBEL since 2009. The actual composition did not change since
2009 reflecting good performance and strategy.
17
18
Source: Bloomberg
19
We
20
21
22
5
31.64
1.34
1
-14
0.24
8 10 12 14 16 18 20
-3
-5
-7
-9
-11
-10.3
EV/EBITDA 15
7.87
10
6.2
5
0
-5
1.1
8 10 12 14 16 18 20
-0.51
-10
-15
-16.75
-20
EV/EBITDA 15
20
18
16
18.6
14.4
14
12
P/E 15
10
8
6
6.5
4.7
4
2
0
15
17
19
21
23
25
27
29
31
33
EV/EBITDA 15
23
Source: Bloomberg
24
Source: Bloomberg
25
26