C&C shares hit with 'sell' rating
Published 03/08/2011 | 05:00
SHARES in drinks company C&C slumped yesterday, after a leading broker hit the company with a 'sell' rating and predicted a 13pc decline in the company's share price.
City broker Collins Stewart said the company would face severe competition from AB InBev's new cider, while the weak UK and Irish markets -- the core of C&C's business -- would weigh heavily on the company in the medium term. The broker initiated coverage with a €3 target price for C&C.
"C&C remains in transition and operates in challenging markets (Ireland and Britain) which combine to provide a less attractive investment in our view," said Collins Stewart's Wayne Brown.
"Magners is facing a meaningful threat from AB InBev's Stella Cider. It is likely that Stella's promotional phasing will drive meaningful distribution gains over the medium term and, with Magners unable to compete on price, it is exposed.
"Aside from potential M&A, we cannot see an obvious catalyst [for the stock]. With low confidence in forecasts and mindful that cash flow return on assets has been falling the past four years, we see better opportunities elsewhere in the beverage sector," he added.
C&C closed down 3.48pc at €3.33.