Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF)

CAPS Rating: 3 out of 5

The Company and its subsidiaries are engaged in the production, distribution and marketing of certain Coca-Cola trade beverages in Mexico, Central America, Colombia, Venezuela, Brazil and Argentina.

Recs

1
Player Avatar ValuePEG (91.62) Submitted: 2/9/2010 3:10:40 PM : Outperform Start Price: $55.78 KOF Score: -3.15

Recent bond issue was 6 times oversold, this speaks volumes about KOF's ability to raise capitol and refinance it's large debt. KO's ability to slightly outperform market expectations in 4Q09 was largely due to overseas sales growth, this bodes well for KOF's upcoming earnings release:

http://www.mzweb.com.br/femsa/web/arquivos/KOF_ER_4Q09_20100204_ENG.pdf

Mexico just upgraded to "Overweight" by Citibank:

http://www.smartmoney.com/news/on/?story=on-20100208-000178&cid=1244&source=TheMotleyFool

Mexican Peso has leveled off, but still trading at almost a 20% drop to USD since the global depression started, look for at least a 10% retracement over the next year as economies improve:

http://www.fxstreet.com/rates-charts/live-charts/detach.aspx?idparell=9738

Member Avatar ValuePEG (91.62) Submitted: 2/9/2010 6:32:17 PM
Recs: 1

As far as recent opinions 2 analysts downgraded KOF in Jan, Credit Suisse Jan 20th & BofA/Merrill Jan 12th both from 'Buy' to 'Neutral'. As the market sold off on Jan 12th Bill Gates added another ~300k shares Jan 11,12,13, to his already very large position held in his Bill & Melinda Gates Foundation for ~$18M. Even Warren Buffet has a very large position in the parent company KO.

Obviously opinions matter, but I will take those of 2 astute investors with their cold cash at risk over a couple analysts with nothing at risk.

Further point of the bond issue, during 2009 interest paid on debt was reduced approximately 20% from ~$480M in 2008 to ~$400M in 2009. This amount will continue to decline as they refinance debt at lower rates and continue to pay down debt with excess cash, the combination actually compounds the reduction in interest expense.

Final point for short term investors, KOF pays an annual dividend which for the last 5 years has steadily increased, as in 2009 they had record FCF and Cash From Operations, this will most likely increase again. What does this mean to you? Well the exercise date is less than 2 months away (~4/6/2010) and will be about $.60/share or about 6% if you only hold it through the exercise date.

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