ALSEA S.A.B. DE C.V.
Resuming coverage with BUY and MP 18.00 target price
June 12, 2012
We are resuming coverage on Alsea, with a BUY rating and a 12-month target price of
MP 18.00 per share and a potential 19% return. Our recommendation is based mainly on
the company’s strong fundamentals which include: i) our belief that this will be a exceptional
strong year for ALSEA, with an EBITDA growth of 26% due mainly to the recent acquisition
of the Italianni’s (52 units) chain; ii) we expect ALSEA’s EBITDA to increase another 13% in
2013E due mainly to the opening of 110 new units, of which 45 will be under the Starbucks
brand, the jewel of the crown; iii) ALSEA’s leading position in the Mexican fast food and
casual dining industry through a wide range of prestigious formats including Domino’s Pizza,
Starbucks, Burger King, Italianni’s, PF Chang, California Pizza Kitchen, and Chili’s; iv) a
positive free cash flow generation of around MP600 million in 2012E and MP 700 million in
2013E; v) a manageable financial structure with a net debt to EBITDA of 2.2x at the end of
1Q12 which should improve to 1.6x by 2013E; and, vi) a management team with a solid track
record in this industry.
We also believe that Alsea’s valuation is attractive at current levels as the stock
trades at a 2012E EV/EBITDA of 8.1x, and a projected P/E of 19.6x, which compare to
the average of 10.7x and 18.9x for its US peers, including Starbucks and Domino’s.
We believe that ALSEA’s multiples are low given that this company’s growth potential is
higher than that of its US peers.
Buy
Local Ticker
ALSEA*
Price Target
MXN 18.00
Last Price
MXN 15.13
Expected Return
19%
2012E Div. Yield
0%
Total Expected Return
19%
Mkt. Cap (Million)
MXN 9,349
Ent. Value (Million)
MXN 12,972
LTM Pric e Range
(9.55 - 16.81)
Stock performance
150
140
130
Our new target price is calculated through a discounted cash flow (DCF) model, which
assumes a discount rate of 9% and a perpetuity growth rate of 4%. The implied EV/
EBITDA and P/E are 9.4x and 23.3x.
Short-term drivers: We consider that events such as the UEFA Euro 2012 and the Olympic
Games will boost ALSEA’s SSS. Chili’s’ and Domino’s will have the greater exposure to such
events.
Alsea’s main operational risks: i) Delays to integrate the Italianni’s restaurants; ii) risk of
breaching the conditions of the agreement with Starbucks; and iii) more competition from
other fast-food chains.
120
110
100
90
80
Jul-11
Sep-11
Nov-11
Jan-12
ALSEA
Mar-12
IPC
The main risks to our BUY recommendation would be if the company reported weaker
-than-expected results or if the Mexican economy weakened affecting adversely
consumer confidence and spending.
2010
2011E
2012E
2013E
2014E
8,996
1,003
11.2%
151
0.24
- 0.40
5.3%
10,734
1,245
11.6%
204
0.33
- 0.20
6.8%
13,310
1,567
11.8%
257
0.77
0.00
9.2%
15,193
1,774
11.7%
351
0.57
0.00
12.4%
17,300
1,964
11.4%
482
0.78
0.00
15.6%
Estim ates (MXN)
Net sales
EBITDA
EBITDA margin
Net income
EPS
DPS
ROE
Valuation
EV/EBITDA
P/E
P/BV
1
10.4x
61.3x
3.2x
10.3x
45.3x
3.1x
8.1x
19.6x
3.3x
7.0x
14.0x
3.7x
6.2x
19.2x
3.0x
David Foulkes Gonzalez
Retail
dfoulkes@actinver.com.mx
℡ +52 (55) 1103 6600 x 5045
Actinver
Oficinas Corporativas
Guillermo González Camarena 1200,
Piso 5, Centro de Ciudad Santa Fé
México, D.F. 01210
May-12
Discounted Cash Flows (DCF) Model (MXN million)
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019
2020E
2021E
2022E
Perp.
660
748
527
-13
646
-
703
771
532
-17
709
649
699
794
559
-24
692
580
812
818
587
-7
768
589
939
842
616
-19
894
627
1,026
912
1,140
-48
846
543
1,098
976
1,220
-51
905
532
1,175
1,044
1,305
-55
969
521
1,257
1,117
1,397
-59
1,036
510
1,345
1,196
1,495
-63
1,109
500
1,439
1,279
1,599
-67
1,187
490
22,155
9,142
NOPLAT
D&A
CAPEX
Change in WC
FCFF
NPV FCFF
WACC Assumptions
Cost of equity
Risk-free rate
Market risk premium
Beta
Equity risk premium
Country risk premium
10.1%
Cost of debt
Risk-free rate
Credit spread
Country risk premium
Cost of debt (BT)
Tax rate
WACC
6.9%
3.5%
4.8%
1.5%
9.8%
30.0%
9.3%
3.5%
5.5%
0.92
5.1%
1.5%
Debt / Capitalization
Perpetual growh
25%
4%
So ur ce: A ct i nver .
Relative valuation table
Security
Alsea
Starbucks
Domino's (US)
Mc Donald's
Yum Brands
Chipotle Mexican Grill
Dunkin' Brands Group
Panera Bread Company
Brinker Int'l
Cheesecake Factory
Wendy's
Papa John's Int'l
Dine
Darden
Average
2
Price (in USD)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1.07
53.24
29.23
87.26
63.89
399.59
33.77
144.93
30.74
31.02
4.45
46.51
43.91
49.34
Market Cap
(USD Mn)
679
40,383
1,693
88,678
29,425
12,668
4,068
4,308
2,317
1,675
1,737
1,108
804
6,347
195,890.3
EV/EBITDA 2012E EV/EBITDA 2013E
8.1x
14.9x
10.8x
9.7x
10.5x
22.0x
15.9x
11.1x
7.4x
7.4x
8.3x
8.7x
7.4x
7.6x
10.7x
7.0x
12.1x
10.2x
9.1x
9.5x
17.7x
14.1x
9.0x
6.6x
6.8x
7.7x
7.7x
2.8x
6.9x
9.6x
P/E 2012E
19.6x
28.4x
14.8x
15.6x
18.5x
44.7x
26.8x
25.7x
14.9x
16.3x
28.6x
17.9x
10.2x
13.3x
18.9x
P/E 2013E
14.0x
22.9x
13.0x
14.5x
16.5x
35.8x
23.8x
21.6x
13.4x
14.7x
22.2x
16.5x
9.9x
12.1x
16.9x
EBITDA chg.
2012E
32%
26%
5%
4%
16%
27%
26%
20%
7%
9%
(6%)
13%
(2%)
3%
9%
EBITDA chg.
2013E
10%
22%
7%
7%
10%
23%
11%
17%
8%
9%
10%
13%
(2%)
10%
10%
Net Debt /
EBITDA
2.2x
(0.8x)
4.8x
1.0x
0.8x
(1.0x)
4.7x
(0.7x)
1.4x
(0.2x)
3.0x
0.0x
5.6x
1.9x
1.6x
2009
Income Statement Highlights (MXN mn)
2010
2011
2012E
2013E
2014E
8,587
3,166
5,421
63.1%
5,086
665
1,000
11.6%
335
3.9%
-132
188
45
23.9%
8,996
3,163
5,833
64.8%
5,505
675
1,003
11.2%
328
3.6%
-91
283
128
45.2%
10,734
3,788
6,946
64.7%
6,411
710
1,245
11.6%
535
5.0%
-118
328
105
32.0%
13,310
4,652
8,658
65.0%
7,839
748
1,567
11.8%
819
6.2%
-382
377
111
29.6%
15,193
5,264
9,929
65.4%
8,926
771
1,774
11.7%
1,003
6.6%
-400
531
172
32.4%
17,300
5,997
11,303
65.3%
10,133
794
1,964
11.4%
1,170
6.8%
-362
942
448
47.6%
-96
3
104
1.2%
10
0.17
134
8
151
1.7%
10
0.24
223
27
204
1.9%
10
0.33
265
8
257
1.9%
10
0.77
359
8
351
2.3%
10
1.20
494
11
482
2.8%
10
1.84
10.5%
-3.2%
-18.0%
4.8%
0.3%
45.7%
19.3%
24.1%
35.1%
24.0%
25.9%
131.7%
14.2%
13.2%
264.0%
13.9%
10.7%
140.3%
2009
2010
2011
2012E
2013E
2014E
Total Assets
Cash & investments
Inventory
Accs. Receivable
Net PP&E
5,809
463
293
430
2,898
6,110
640
391
478
2,942
9,407
739
429
573
3,472
8,691
697
516
689
3,435
8,603
605
571
763
3,405
8,731
535
644
860
3,179
Total Liabilities
Accs. Payable
Debt
ST Debt
LT Debt
2,676
559
1,302
593
709
2,999
680
1,598
230
1,368
6,099
988
4,063
185
3,878
5,620
856
3,836
278
3,651
5,486
972
3,518
278
3,333
5,354
1,105
3,211
278
3,026
Equity
Shareholder's Equity
Non-controlling interest
3,132
2,909
224
3,111
2,865
246
3,308
3,008
299
3,071
2,792
281
3,117
2,836
282
3,376
3,096
282
Revenue
COGS
Gross Profit
Gross Margin
SG&A
Depreciation
EBITDA
EBITDA margin
EBIT
EBIT Margin
Net Financing Cost
EBT
Taxes & PTU
Tax + PTU rate
Net Income
Minority Interest
Majority Net income
Net margin
Shares Outstanding (millions)
EPS
Revenue Growth
EBITDA Growth
EPS Growth
Balance Sheet Highlights
3
Disclaimer
Analyst Certification for the following Analysts:
Pablo Adolfo Riveroll Sanchez
Jaime Ascencio
David Foulkes
Karla Peña
Martin Lara
Pablo Duarte
Ramón Ortiz
Roberto Galván
The analyst(s) responsible for this report, certifies(y) that the opinion(s) on any of the securities or issuers mentioned in this document, as
well as any views or forecasts expressed herein accurately reflect their personal view(s). No part of their compensation was, is or will be
directly or indirectly related to the specific recommendation(s) or views contained in this document.
Any of the business units of Grupo Actinver or its affiliates may seek to do business with any company discussed in this research
document. Any past or potential future compensation received by Grupo Actinver or any of its affiliates from any issuer mentioned in this
report has not had and will not have any effect our analysts’ compensation. However, as for any other employee of Grupo Actinver and its
affiliates, our analysts’ compensation is affected by the overall profitability of Grupo Actinver and its affiliates.
Guide to our Rating Methodology
Total Expected Return on any security under coverage includes dividends and/or other forms of wealth distribution expected to be
implemented by the issuers, in addition to the expected stock price appreciation or depreciation over the next twelve months based on our
analysts’ price targets. Analysts uses a wide variety of methods to calculate price targets that, among others, include Discounted Cash Flow
models, models based on expected risk-adjusted multiples, Sum-of-Parts valuation techniques, break-up scenarios and relative valuation
models.
Changes in our price targets and/or our recommendations. Companies under coverage are under constant surveillance and as a result
of such surveillance our analysts update their models resulting in potential changes to their price targets. Changes in general business
conditions potentially affecting either the cost of capital and/or growth prospects of all companies under coverage, or a given industry, or a
group of industries are typical triggers for revisions to our price targets and/or recommendations. Other micro- and macroeconomic events
could materially affect the overall prospects of an individual company under coverage and, as a result, such event-driven factors could lead
to changes in our price targets and/or recommendation of the company affected. Even if our overall expectations for a given company
under coverage have not materially changed, our recommendations are subject to revision if the stock price has changed significantly, as it
will affect total expected return.
Terms such as "price targets, our price targets, total expected return, analyst's price targets” or any other similar phrase are used in this
document as complementary to our recommendation or as a condition that could change in our point of view and, according to article 188 of
Securities Market Act, do not imply in any way that Actinver, its agents, or its related companies are in any form providing assurance or
guarantee, nor assuming any responsibility for the risks associated with any investment in the discussed securities.
Recommendations for companies, both in the Índice de Precios y Cotizaciones (IPyC) Index and also not belonging to the index.
For stocks, we have three possible recommendations:
a) BUY, b) HOLD or c) SELL. A stock classified as BUY is expected to yield returns at least 5% above than that of the IPyC Index. Stocks
rated as HOLD are expected to yield returns similar to the IPyC Index, within a range of +5/-5%. Many of the companies within this range
are often times solid companies which have reached their potential in a short amount of time and should still be considered as a good
investment. Stocks rated as SELL are expected to yield returns below 5% of the IPyC Index.
Rating Distribution as of June 8, 2012
All Companies in the BMV
BUY: 71%
HOLD: 23%
SELL: 6%
4
Research
Pablo Adolfo Riveroll
Sánchez
Managing Director of Research and Risk
Jaime Ascencio
Economy & Markets
David Foulkes
Retail
Karla Peña
Food & Beverages
(52) 55 1103-6600
x5035
kbpena@actinver.com.mx
Martín Lara
Telecoms, Media & Financials
(52) 55 1103-6600
x5033
mlara@actinver.com.mx
Pablo Duarte
Conglomerates, Industrial & Mining
(52) 55 8173-5200
x80161
pduarte@actinver.com.mx
Ramón Ortiz
Concessions, Construction & Real Estate
(52) 55 1103-6600
x5034
rortiz@actinver.com.mx
José Luis Saiz
Analyst Jr.
Roberto Galván
Technical Analysis
(52) 55 1103-6600
x5800
(52) 55 1103-6600
x5032
(52) 55 1103-6600
X5045
(52) 55 1103-6600
x5023
(52) 55 1103 -6600
x5039
priveroll@actinver.com.mx
jascencio@actinver.com.mx
dfoulkes@actinver.com.mx
jgarcias@actinver.com.mx
rgalvan@actinver.com.mx
Investment Strategy
Ernesto O’Farrill
Head, Investment Strategy
(52) 55 1103-6645
eofarril@actinver.com.mx
Sales & Trading
Gerardo Román
Head, Sales & Trading
(52) 55 1103-6690
Julie Roberts
Head, Institutional Sales
(210) 298 - 5371
Tulio Chávez
Institutional Sales
(52) 55 1103-6762
mchavez@actinver.com.mx
José María Celorio
Institutional Sales
(52) 55 1103-6606
jcelorio@actinver.com.mx
María Antonia Gutiérrez
Institutional Sales
(52) 55 1103-6796
agutierrez@actinver.com.mx
5
groman@actinver.com.mx
jroberts@actinversecurities.com