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    Financials of KO VS PEP (2011) Financials of KO VS PEP (2011) Presentation Transcript

    • VERSUSNICKOLAS KANGSHENG JIAQI ALVIN SIMYEE
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations INTRODUCTION BEFORE WE BEGIN...
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations TICKER SYMBOL publicly traded shares of a stock on the stock market. used to identify KO Coca Cola PEP Pepsi Co.
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations COMPANY BACKGROUND KO PEP HEADQUARTERS ATLANTA, GEORGIA NEW YORK ESTABLISHED 1892 1965 INVENTED BY INVENTED BY ORIGIN OF BEVERAGE JOHN PEMBERTON CALEB BRADHAM PERFORMANCE COMPANY MOTTO LIVE POSITIVELY WITH PURPOSE TRADED IN NYSE NYSE
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations PRODUCT OFFERING Other stuff 77% Snacks and other stuff Beverages <50% Beverages SELLING BEVERAGES AND CARBONATED SOFT DRINKS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations MACRO ANALYSIS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis RecommendationsGLOBAL BEVERAGES INDUSTRY SEGMENTATION 2010 BEER, CIDER & FABS SOFT DRINKS 33% 32% SPIRITS WINE 17% 18%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations SOFT DRINK INDUSTRY
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis RecommendationsGLOBAL SOFT DRINKS MARKET SHARE 2010 COCA COLA 24% OTHERS 58% PEPSI 14% NESTLE 5%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations GLOBAL SOFT DRINKS MARKET VALUE $ Million % Growth 600,000 4.5 4.0 500,000 3.5 400,000 3,0 % Growth 2.5$ Million 300,000 2.0 200,000 1.5 1,0 100,000 0.5 0 0.0 2006 2007 2008 2009 2010 Growing at a decreasing rate
    • Introduction Macro Analysis Strategies Financing Investments Technical Analysis Fundamental Analysis Recommendations GLOBAL SOFT DRINKS MARKET VALUE FORECAST 700,000 $ Million % Growth 4.0 600,000 3.5 3,0 500,000 2.5 400,000 % Growth$ Million 2.0 300,000 1.5 200,000 1,0 100,000 0.5 0 0.0 2010 2011 2012 2013 2014 2015 Forecasted to grow more
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations SNACKS INDUSTRY
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations GLOBAL SAVORY SNACKS MARKET SHARE 2009 PEPSI 29% OTHERS KRAFT 66% 3% CALBEE 2%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations GLOBAL SAVORY SNACKS MARKET VALUE $ Million % Growth 80,000 6 70,000 5 60,000 4 50,000 % Growth$ Million 40,000 3 30,000 2 20,000 1 10,000 0 0 2005 2006 2007 2008 2009 Growing at a constant rate
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations GLOBAL SAVORY SNACKS MARKET VALUE FORECAST $ Million % Growth 100,000 6 90,000 5 80,000 70,000 4 60,000 % Growth$ Million 50,000 3 40,000 30,000 2 20,000 1 10,000 0 0 2009 2010 2011 2012 2013 2014 Continue growing at constant rate
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations ECONOMIC CONDITIONS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations GDP GROWTH PERCENT; QUARTER OVER QUARTER, ANNUALIZED Developing 12 Economies 10 8 WORLD 6 4 2 0 -2 -4 Advanced -6 Economies -8 -10 2007 2008 2009 2010 2011 2012 Higher income of developing countries leading to soft drink industry growth
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations INFLATION PERCENT; YEAR OVER YEAR, PERIOD AVERAGE CONSUMER PRICE INDEX 10 Developing 8 Economies 6 4 WORLD Advanced 2 Economies 0 -2 2007 2008 2009 2010 2011 2012 Inflation reduces operating margin of the soft drink industry
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations CONSUMER TRENDS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations KEY TRENDS Carbonate consumption decreasing OTHERS RTD TEA 5% Consumers more health & COFFEE 9% CARBONATES conscious 41% FUNCTIONAL DRINKS 10% They consume less carbonates JUICES 17% PEP may be better off as BOTTLED WATER they are more diversified 20%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations STRATEGIES
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations SWOT
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations STRENGTHS WEAKNESS Strong brand equity Product recalls Global presence Dependence on bottling partners OPPORTUNITY THREATS Strategic acquisitions Highly competitive and agreements market Potential in emerging Volatile raw markets material costs
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations STRENGTHS WEAKNESS Sturdy R&D activities Declining profitability Strong market foothold Declining liquidity position Diversified brand portfolio Dependence on a few customers OPPORTUNITY THREATS Strategic agreements Pending litigations Growing organic foods Rising commodity prices Growth in bottled water Stringent government market regulation
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations PRODUCT DIVERSIFICATION More than 3300 beverage products Leadership position in snacks segment: Lays.
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations BRAND PORTFOLIO 1 23 # # Brand (Interbrand) Brand (Interbrand) Owns / licenses more than 500 brands. Pepsi alone generates more than $15,000m of annual sales for 20 brands in portfolio
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations GEOGRAPHICAL MARKET EXPANSION Operates in more than 200 countries Operates in more than 200 countries
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations ROBUST MANUFACTURING AND DISTRIBUTION FACILITIES Largest beverage distribution systems 135 production plants 30 manufacturing plants 2535 warehouses 112 bottling and canning plants 80 bottling plants
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations BOTTLER CONSOLIDATION CCE PBG & PAS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations FINANCING ACTIVITIES
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations CAPITAL STRUCTURE 2011 KO PEP BONDS/DEBT BONDS/DEBT 53% 1% BONDS/DEBT 28% PREFERENCE STOCK COMMON STOCK COMMON STOCK 72% COMMON STOCK 46%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DEBT-EQUITY RATIO PEP KO
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DEBT-EQUITY RATIO PEP FINANCIAL CRISIS Reliance on Debt Very cheap Bonds Low US interest Rates KO
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DEBT-EQUITY RATIO PEP: Expansion into Russia PEP Acquired Bottlers Increase in 17 billion USD in debts Increase in 5 billion USD in equity KO
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DEBT-EQUITY RATIO PEP KO KO: Expansion into China Acquired Bottlers Increase in 12 billion USD in debts Increase in 6 billion USD in equity 4.5 billion USD worth of Bonds (High Grade Corporate Bonds)
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations INVESTMENT DECISIONS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Invested 3 new bottling Building a new beverage plants in China plant in Russia Acquired Honest Tea Completed acquisition an organic bottled tea of Wimm-Bill-Dann company
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Opened 3 new plants in China Honest Tea is America’s top selling organic bottled tea
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Lower cost of production Wimm-Bill-Dann produces 1000 different types of yogurt and dairy drinks as well as 150 types of fruit juices and fruit drinks in Europe
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations FUNDAMENTAL ANALYSIS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Financial Condition
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations BETA NYSEmeasure of a stocks volatility in relation to the market. Beta is a KO 0.59 PEP 0.54 INDUSTRY 0.60
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations QUICK RATIOor quick assets to extinguish current liabilities immediately. Ability to use its near cash KO 1.02 PEP 0.89 INDUSTRY 1.1 CURRENT RATIO short-term obligations. Measures a companys ability to pay KO 1.17 PEP 1.10 INDUSTRY 1.2
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DEBT-EQUITY RATIO KO 0.75 PEP 1.17 INDUSTRY 0.94 PEP KO
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations PRICE
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations P/E RATIO TTM to profit earned per share. Price paid per share relative KO 12.5% PEP 15.5% INDUSTRY 14.5%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Dividend
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Dividend paid out each year relative to its share price. Dividends Yield KO 2.77% PEP 3.32%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DIVIDEND PER SHARE share issued. The the sum of declared dividends for every ordinary 2007 2008 2009 2010 2011 KO $1.36 $1.52 $1.64 $1.76 $1.88 PEP $1.43 $1.65 $1.77 $1.89 $2.06 Industry Nestle $0.85 $1.20 $1.19 $1.34 $1.85 Dr Pepper (DPS) - $0.00 $0.15 $0.90 $1.28
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis RecommendationsDIVIDEND PER SHARE $2.25 KO PEP NESN DPS PEP $1.69 KO $1.13 $0.56 $0 2007 2008 2009 2010 2011
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations DIVIDEND PAYOUT RATIO The percentage of earnings paid to shareholders in dividends. 5 year 2009 2010 2011 growth KO 55.97% 30.27% 33.38% 9.46% PEP 48.21% 46.95% 49.11% 13.35% Industry 9.65%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Profit
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations PROFITABILITY KO PEP 2009 2010 2011 2009 2010 2011 Gross Gross 64.22% 63.86% 61.74% 53.51% 54.05% 53.91% Margin Margin Operating Operating 26.56% 24.06% 21.24% 18.61% 14.41% 15.23% Margin Margin Profit Profit Margin 22.02% 33.63% 27.7% Margin 13.74% 10.92% 10.1% Industry Profit Margin 19.3%
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations EPS: profit allocated to each outstanding share of common stock The EARNINGS PER SHARE TTM KO 5.44 PEP 3.99
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations NET INCOME Growth (5 year average) KO 19.37% PEP 9.23% INDUSTRY 14.72% Net Income TTM
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations RATIO COMPARISON KO PEP Quick Ratio 1.02 0.89 Current Ratio 1.17 1.11 Debt-Equity Ratio 0.75 1.17 P/E Ratio TTM 12.5% 15.5% Profitability 29.8% 10.15% EPS 5.44 3.99 Dividend Yield 2.77% 3.32% Dividend Per Share 1.88 2.06 Dividend Payout Ratio 33.38% 49.11% BETA 0.59 0.54 OVERALL More Profitable Pays More Dividends
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations TECHNICAL ANALYSIS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations 5 YEARS KO
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations 5 YEARS PEP
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations WHEN TO BUY?
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations WHEN TO BUY? KO PEP BUY at HOLD MA200 Price (~$67) or OR buy at support support levels of levels of $64.57 or $63.49 $60.61 or $59.44
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations RECOMMENDATIONS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations MACRO is more diversified PEP ANALYSIS Carbonates are pulling the industry back STRATEGY & Both are on par as they are in an oligopoly INVESTMENTS What one does will affect the otherFINANCING in debt than PEP KO is lessACTIVITIES Less effect during recession
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations FUNDAMENTAL KO has better profitability PEP gives out better dividends ANALYSIS TECHNICAL and long term buy KO is better short PEP is losing investors confidence ANALYSIS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations Team’s Choice STRONG BUY KO IN VIEW OF ECONOMIC CONDITIONS STRONG FUNDAMENTALS
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations PEP HOLD, biased towards selling Fundamental Analysis shows below-average performance Technical Analysis confirms investors’ sentiments
    • Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations THE END Questions?