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The story about this hidden spin-off remains the same



June 30, 2010 – Comments (0) | RELATED TICKERS: CCE

About two months ago I gave the green thumb in caps to Coca-Cola Enterprises (CCE) saying the following:

The company's European operations, which is all that will be left after Coke purchases CCE's North American Bottlers, are a much better business than the one that is being sold.

Despite Europe's economic problems, the area's per-capita soft drink consumption is much lower than the United States'. As a result, CCE has more room to grow now that it only operates in Europe.

We are now able to get the crown jewel of CCE, with higher margins, better ROIC, and better growth at a reasonable valuation.

This transaction is almost like a spin-off of the company's European business without the official title.

Nothing about this stock has changed, other than the general weakness in the markets has made this stock's price 3% more attractive than it was then.

Michael Santoli wrote a quick blurb on the company for this week's Barron's that echos what I said earlier about CCE.  Here's the highlights:

Even with currency headwinds, CCE is forecasting earnings growth of 10% to 12% in 2010.  After the $10 special dividend that is scheduled for later this year into account, Mr. Market is currently valuing CCE's European operations at only $16/share.

Mark Minichiello of QCA Capital Management, a deep-value-oriented firm in Los Angeles, figures the new CCE is worth $22 a share, based on a reasonable multiple of the company's Ebitda, implying a $32 value for the shares including the dividend.  Chairman and CEO John Brock also apparently sees value, having picked up several thousand shares this month at $25.85. 

I'd say that I am going to add shares of CCE to my CAPS portfolio today, but I already have.


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