Belgium: Morgan Stanley lowers InBev to Equalweight
Morgan Stanley downgrades InBev to equalwight from overweight on valuation grounds, Dow Jones posted on March 30. Still sees upside to the shares, but notes uncertainty over the Brazilian real as well as potential for labor relation issues to delays cost savings in Europe. Maintains EUR40 target price.
On March 28 Dow Jones posted that shares of InBev SA came under pressure as a flurry of bad news dogged the world's biggest brewer by volume.
All four of the company's breweries in Belgium were closed by strikes for the day, unions said, as more than 2,000 workers took to the streets around its headquarters in Leuven. They were protesting plans to close breweries and lay off staff as part of ongoing cost-cutting.
At the same time, investors were trying to assess the impact of news from Brazil, the company's main profit driver, that Finance Minister Antonio Palocci has resigned due to corruption allegations.
"He was essential for the financial discipline of the left-wing government," said Gerard Rijk, an analyst at ING financial markets. "This could affect confidence in the Brazilian economy, posing questions of whether the exchange rate will continue to be strong," he said. "A lower exchange rate for the real will mean lower profits for InBev," he added.
In another setback, leading Belgian daily newspaper De Tijd gave a poor review of a new beer launched in Belgium by the company, commenting that cost-cutting appeared to be compromising quality.
At 1523 GMT, Inbev shares were down EUR0.56, or 1.4%, at EUR39.32 in a slightly lower broader market. "Three negative news items in one go is a blow for the company," said Rijk.
Nevertheless he reckons ths company's leading positions in core markets and its strong focus on reducing costs continue to justify a buy rating on the stock.
Most analysts said the strikes were unlikely to have a serious effect on the company. "Belgium isn't a huge part of the business," said Johan vanden Hooven at Delta Lloyd Securities. "Stock markets like the cost-cutting but unions don't. But sentiment-wise it is never positive."
A possible fall in the value of the Brazilian real was potentially a bigger worry, he said. "It is something we will have to keep a watch on. The real is a very important currency for InBev," he said.
Tilbage
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