Altadis
I. Summarize Altadis strategy:
Altadis Strategy is to do capital restructuring by implementing a share buy back plan to increase their shareholders value.
In 2004 Altadis stated that it will buyback 4% of its share capital from the shareholders for an estimate amount of 530 Million Euros, Altadis will resume an annual 5% share buy back strategy from 2005 onwards with an estimated amount of 600 Million Euros to be paid.
At 25 Euros/share the total remuneration yield is 7.4% in 2004 & 8.9% in 2005
At 29.52 Euros/share the total remuneration yield is 6.2 % in 2004 & 7.4 % in 2005.
II. The report offers an economic valuation of Altadis. What do you think about it? Would you change anything in that valuation?
We believe that Altadis strategy is successful for the below reasons:
1- Consolidation plus share buy backs should boost EPS growth by adding a significant value for its shareholders especially when Altadis European peers are more concerned about reducing debt in the awake of imperial Tobacco’s acquisition of Reemtsma and Gallaher’s purchase of Austeria Tabak, also it is not expected that they will pursue a share buyback strategy in the short to medium term.
2- Better product mix, price increases and greater production efficiency are expected to have a positive impact on Altadis Economic value of Free cash flow which was 8.7% on 2003 and it is expected to grow by 10%.
3- Despite the expected decline in the French cigarette division following tax and price hikes and not being able to increase the prices in that line except by only 2% (inline with the CPI), the significant cigarette prices increase in Spain, the growth in the emerging markets, the growth in Cigar division and in logistics is promising and it suggests that Altadis will outperform its European peers also with the upward trend of the consumption in the underdeveloped countries.
III. How does the above strategy fit with the offered evaluation of Altadis?
We believe that the above strategy
Altadis Strategy is to do capital restructuring by implementing a share buy back plan to increase their shareholders value.
In 2004 Altadis stated that it will buyback 4% of its share capital from the shareholders for an estimate amount of 530 Million Euros, Altadis will resume an annual 5% share buy back strategy from 2005 onwards with an estimated amount of 600 Million Euros to be paid.
At 25 Euros/share the total remuneration yield is 7.4% in 2004 & 8.9% in 2005
At 29.52 Euros/share the total remuneration yield is 6.2 % in 2004 & 7.4 % in 2005.
II. The report offers an economic valuation of Altadis. What do you think about it? Would you change anything in that valuation?
We believe that Altadis strategy is successful for the below reasons:
1- Consolidation plus share buy backs should boost EPS growth by adding a significant value for its shareholders especially when Altadis European peers are more concerned about reducing debt in the awake of imperial Tobacco’s acquisition of Reemtsma and Gallaher’s purchase of Austeria Tabak, also it is not expected that they will pursue a share buyback strategy in the short to medium term.
2- Better product mix, price increases and greater production efficiency are expected to have a positive impact on Altadis Economic value of Free cash flow which was 8.7% on 2003 and it is expected to grow by 10%.
3- Despite the expected decline in the French cigarette division following tax and price hikes and not being able to increase the prices in that line except by only 2% (inline with the CPI), the significant cigarette prices increase in Spain, the growth in the emerging markets, the growth in Cigar division and in logistics is promising and it suggests that Altadis will outperform its European peers also with the upward trend of the consumption in the underdeveloped countries.
III. How does the above strategy fit with the offered evaluation of Altadis?
We believe that the above strategy