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Business, Finance, Occupation & Industry

Should I Buy Rexam?

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By Harvey Jones, The Motley Fool

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I’m shopping for shares, and I’ve found plenty of goodies for sale. Should I pop Rexam into my basket?

It’s in the can
If you’re reading this while sipping from a can of drink, there’s a good chance you are contributing to the profits of Rexam. This solid FTSE 100-listed stock earns most of its income by manufacturing drinks cans, and is one of the world’s top five consumer packaging firms. Should I buy it?

I have developed a quiet respect for the unsung heroes of the FTSE 100, names such as distribution group Bunzl, outsourcer Serco, plumbing merchant Wolseley, and now can-maker Rexam. These companies may be low on glamour but they have quietly knuckled down to the admirable job of boosting sales, pioneering new markets and boosting shareholder value. Rexam is up 77% in the last three years and 29% in the past 12 months. That puts it nicely ahead of the FTSE 100 as a whole, which grew 11% and 14% respectively in that time.

T-Rexam
Its full-year results for 2012 showed a 6% rise in beverage can volumes and 5% rise in operating profits to £456 million. Sales rose 2% to £4.31 billion, while adjusted profit before tax rose 1% to £418 million. There was good news for shareholders, with the board proposing a 6% hike in its final dividend to 10.2 pence, taking the total dividend to 15.2 pence for the year. Rexam is stripping out its non-core business to focus on beverage cans, a strategy that included the sale of its Personal Care business in December, which allowed it to return £395 million to shareholders.

While acknowledging “less than ideal” market conditions, chairman Stuart Chambers has highlighted Rexam’s “underlying resilience”, with disciplined capital spending and healthy cash generation maintaining a strong balance sheet. Its health care operation had a difficult year, largely due to one of its customers products coming off patent, with operating profit plunging from £65 million in 2011 to £48 million. But its return on capital employed (ROCE) looks healthier 14.7% in 2012, and Chambers says it is on course to hit its 15% target this year.

Tin cups
One of the key things I look for in a FTSE 100 company is exposure to fast-growing emerging markets. Rexam doesn’t disappoint on that score, with a market-leading position in beverage cans in three out of the four BRIC countries, and a new Brazilian plant coming online just in time for both the World Cup and Olympics. In these troubled times, I also like its focus on cost savings, which helped cut group net debt from £1.2 billion to just £800 million. Although I’m concerned about its exposure to the cost of one single commodity, aluminum.

Rexam now yields 2.9%, against 3.3 for the FTSE as a whole, neatly covered 2.3 times. Earnings per share growth looks strong at 15% this year and 8% in 2014. For me, the figure that really stands out is

From: http://www.dailyfinance.com/2013/04/11/should-i-buy-rexam-2/

Business, Finance, Occupation & Industry

British American Tobacco: Buy, Sell, or Hold?

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By Zarr Pacificador, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market. Right now, I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. 

I hope to pinpoint the very best buying opportunities in today’s uncertain market, as well as highlight those shares I feel you should hold… and those I feel you should sell.

I’m assessing every share on five different measures. Here’s what I’m looking for in each company:

  1. Financial strength: Low levels of debt and other liabilities.
  2. Profitability: Consistent earnings and high profit margins.
  3. Management: Competent executives creating shareholder value.
  4. Long-term prospects: A solid competitive position and respectable growth prospects.
  5. Valuation: An underrated share price.

A look at British American Tobacco
Today, I’m evaluating British American Tobacco  , a British multinational tobacco company, which currently trades at 3,482 pence. Here are my thoughts:

1. Financial strength: British American Tobacco is in a solid financial position with net debt of only 1.5 times operating profits and interest cover a hefty 13 times. The company also generates consistent and stable free cash flows averaging over 3 billion pounds per year for the past three years.

2. Profitability: Revenues have increased 7% per year for the past five years while earnings per share has grown by 13% per year and dividends per share by 15% per year for the past decade. Operating margins have expanded from around 10% early in the decade to around 35% the last few years. The 10-year average return on equity (ROE) and return on capital employed (ROCE) have been a remarkable 60% and 35%, respectively.

3. Management: Nicandro Durante assumed the post of CEO in March 2011. He was previously the COO and has been with the company since 1981. British American Tobacco‘s share buyback program, which was suspended in 2009, was resumed in 2011. It has bought back 750 million pounds’ and 1.25 billion pounds’ worth of shares in 2011 and 2012, respectively. The board has agreed on repurchasing 1.5 billion pounds’ worth of shares for 2013.

4. Long-term prospects: British American Tobacco is the world’s second-largest tobacco company by market share, with a portfolio of 200 brands sold in around 180 markets worldwide. The group has significant exposure to emerging markets, where it derives around 70% of its profits.

The group’s four well-known brands, which it refers to as the Global Drive Brands (GDBs — Lucky Strike, Kent, Dunhill, and Pall Mall) accounted for 35% of the group’s revenues in 2011, and have performed well the last few years increasing volume and market share. As of the last trading statement, GDBs have increased volume by 3% and market share by 0.3%. However, group volumes declined by 1.6% due to the difficult trading conditions in some of its major markets, particularly Southern Europe. But revenues at constant rates of exchange still grew by 4% and adjusted diluted earnings per share were up by 7%. Also, the group saw increases in …read more
Source: FULL ARTICLE at DailyFinance