APB (DMG)

APB acquires majority stake in Solomon Breweries

The news: ASIA Pacific Breweries (APB) has acquired a 97.69% stake in Solomon Breweries in the Solomon Islands for around $21.5 million. Solomon Breweries is the only brewery in the Solomon Islands and has a facility located in Guadalcanal, one of the most populated islands out of the nearly one thousand which make up the state. It has a production capacity of 140,000 hectolitres and is behind local brands SB and Solbrew Lager. Beer consumption in the country was 67,000 hectolitres last year, working out to per capita consumption of around 12 litres. The country has a growing population and its economy has expanded at a compounded annual growth rate of 5.7 per cent from 2006 to 2010.

Our thoughts: This latest acquisition further strengthened APB’s brewery network in the Asia Pacific region, already the most dominant with over 30 brewery operations in 14 countries. In 2009, APB had also acquired 2 companies, a 80.6% stake in PT Multi Bintang (Indonesia) and a 87.3% stake in GBNC (New Caledonia) from Heineken, one of the major shareholders. That transformational deal gave the group access to two large markets and propelled earnings of the group by more than 50% (net profit grew from $172m in FY09 to $263m in FY10). We continue to be positive on the prospects of APB and given the low liquidity of the shares, an alternative means of getting exposure to the stock is via F&N (Buy, Target Price $6.33).