LONDON (SHARECAST) - The world’s second biggest brewer, SABMiller, was the best performing blue-chip in London on Thursday after interim results, but Merrill Lynch remains hard to please.
‘We do not believe the market will upgrade EBITA [earnings before interest, tax and amortisation] materially for 2010, but earnings certainly have scope for upside depending on the guidance on full year interest and tax guidance,’ the US broker reckons.
‘In line with the other brewers the top line missed, but margins were ahead of expectations, leading to likely upgrades,’ Merrill Lynch said, adding that it expects upgrades will be in the region of 3% to 5%.
Based on its own earnings forecasts, however, SABMiller remains the most overpriced brewer in the broker’s research universe, trading on a multiple of 15.8 times projected 2010 earnings, while the free cash flow yield of less than 4% is lowest in the sector.
‘Based on our price objective of 1750p we have a underperform rating on SABMiller,’ the broker concludes.
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