SMC shares get ‘buy’ rating

The corporate and investment banking division of the ING Group, one of the largest financial services organizations in the world, recently gave a "buy" rating on shares of San Miguel Corp. (SMC).

ING Barings described SMC as a "very attractive investment" and lauded the management of the company under its chairman ad chief executive officer Eduardo M. Cojuangco Jr.

SMC’s recent decision to acquire 65 percent of Coca-Cola Bottlers Philippines Inc. (CCBPI) from Coca-Cola Amatil (CCA) was viewed positively. In a 19-page research study, ING Barings said this acquisition will help reduce SMC’s dependence on the beer market and will provide many unique opportunities for the company.

Prior to Amatil’s takeover of CCBPI in 1997, ING Barings noted that the local Coke bottler commanded a 74 percent share of the market. In view of SMC’s extensive distribution and marketing capabilities, ING Barings believes CCBPI is poised to recapture market share. It expects soft drink to account for 25 percent of SMC’s sales in 2001, and forecast CCBPI sales to increase by 10 percent to P33.1 billion this year.

CCBPI has an estimated 70 percent of the Philippine soft drinks markets at present, and reported P28 billion in revenues last year.

ING Barings said CCBPI stands to benefit from the operational improvements provided by the current SMC management, particularly its efforts to enhance distribution and marketing synergies. For instance, it said, that CCBPI could further improve its distribution network by "piggybacking" with SMC’s distribution network.

"This refers to SMC making use of the best available modes of distribution among (its) major businesses," ING Barings said. SMC management has successfully carried this out recently with beer and hard liquor, it noted.