Pair Trade: Long P. Ricard - Short Heineken Tuesday, October 16th 2012Companies Description Investment Case Pernod Ricard (RI FP) has probably one of the highest growth po- tential in European staples sector, thanks to its geographic footprint. Nearly 1/3 of its revenues are derived from Asia. The Asia/ROW region that the company reports (40% of total revenues) grew for a second year running at a double-digit growth rate. This is not only China and India, but also includes mature markets such as Japan and Australia. A key advantage of Spirits versus other Staples is the abil-Market Price Data ity to drive margin expansion. Last FY, Pernod Ricard’s EBITDAPernod Ricard (RI FP) margin increased, even after considering a small hike in marketingLast Price (€) 88.17 spending.YTD Change 23.04%Mkt Cap (€ bn) 23.392 The current gearing of c4x Net Debt/EBITDA should prevent theHeineken (HEIA NA) company from being a part of any major acquisition for the foresee- able future. Pernod Ricard´s earnings are sensitive to the US$/€ ex-Last Price (€) 48.85 change rate given that c20% of group operating profit is from the US.YTD Change 36.55%Mkt Cap (€ bn) 28.135 Heineken (HEIA NA) is still having adverse mix trends in Europe.Source: Bloomberg Nonetheless, Volume and Pricing seems to be improving. Cost bene- fits have been able to offset higher input cost inflation.Analysts Recommendations: Acquiring Asia Pacific Breweries increases Heineken’s exposure to “growth markets”. It seems to have been decisive for the recent re- rating. However, an improvement in European macro-economic en- vironment will probably be needed for the company to increase its organic profit growth. Its short-term outlook could continue to be challenged by weaker trends in Europe, higher COGS and upfront costs for the new cost cutting program.Source: Bloomberg The Pernod Ricard (RI FP) / Heineken (HEIA NA) ratio currentMarket Multiples value is 1.805. We’ll define as our target ratio 1.92 and as stop-loss ratio 1.75. P/EEPS DY 2013 2011/13 2013 Net Debt/ Technical Comment EBITDA Est. CAGR Est. Est. Est. 2012PR (*) 16.88 12.33% 2.02% 3.87Heineken 15.06 9.47% 2.02% 1.99(*) FY ends in JuneSource: BloombergNext Report Date Q1 IMS and FY OctoberPernod Ricard Guidance 25th Q3 - Trading OctoberHeineken Update 24thSource: Bloombergwww.fincor.ptwww.facebook.com/FincorAnnouncement: Fincor—Sociedade Corretora, S.A. provides services of reception, execution, and transmission of orders. The contents men-tioned in this document do not constitute (nor should they be interpreted as to form) any kind of counselling, or investment recommendation, or arecord of our trading prices, or an offer or solicitation to trade in any financial instrument. Fincor—Sociedade Corretora, S.A. Will not accept anyresponsibility resulting from any use referring to said content or about any resulting effect that could have occurred.