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Crown Holdings CCK
January 10, 2011 - 12:44pm EST by
majic06
2011 2012
Price: 33.60 EPS $2.65 $3.25
Shares Out. (in M): 159 P/E 12.7x 10.3x
Market Cap (in $M): 5,400 P/FCF 12.7x 10.3x
Net Debt (in $M): 2,800 EBIT 1,125 1,225
TEV (in $M): 8,200 TEV/EBIT 7.3x 6.7x

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  • Consumer Goods
  • Food and beverage
 

Description

Note:  Numbers above are for 2011/2012 and TEV/EBIT = TEV/EBITDA.
 
Thesis:
  • Global oligopoly with pricing power with defensive end-mkt characteristics led by a shareholder friendly mgmt team.
  • Capital investments and aggressive capital return should lead to accelerating growth in earnings and fcf well above street #s. We expect 2012 earnings and FCF $3.25 with possible upside from a mgmt contract to manage Mivisa assets in Spain as an added kicker.  
 
Business overview
  • Crown Holdings, Inc. engages in the design, manufacture, and sale of packaging products for consumer goods. The company's products include beverage cans and ends, and other packaging products for use by various beverage and beer companies; a range of food cans and ends, including two-and three-piece cans in various shapes and sizes for use by food marketers; and aerosol cans and ends for use by manufacturers of personal care, food, household, and industrial products. In addition, the company produces a range of steel containers for cookies and cakes, tea and coffee, confectionery, giftware, personal care, tobacco, wines, and spirits, as well as non-processed food products. In the industrial market, it manufactures steel containers for paints, coatings, inks, chemical, automotive, and household products. Further, it manufactures and sells canmaking equipment. The company has operations in the Americas, Europe, and the Asia-Pacific.
 
Contrarian:
  • Street is focused on depressed cash flow in 2011 as CCK adds capacity in key markets to support above trend volume growth. Looking past the growth capex, CCK trades at a fcf yield of 10% (pre increased buybacks) and volume growth in emerging markets.
  • CCK is a safer back door way to gain exposure to emerging mkts economies supported by strong cash flow in an uncertain macro backdrop.
  • We are more or less inline with street #s of $0.38 for Q4:10 and Q1:11.
  • We differ for the full year 2011 and 2012 as the benefits from capacity additions and buybacks kick in. 2011e  = $2.65 vs street $2.56. 2012e = $3.25 vs street $2.97.  We can see 2012 as high as $3.50.
Catalysts:2
  • Recently announced accelerated buyback of shares. We expect further announcements in 2011 as CCK fully deploys its excess cash flow.
  • Recently speculated Mivisa, a private euity owned comp in Spain is being acquired by Blackstone highlights the attractiveness of the cash flows
Risk/Reward -- $11 up, $4 down:
  • Upside 14x 2012 FCF $3.25 = $45, inline with historic multiples
  • Downside 10x $3.00 in 2011 maint fcf.
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Catalyst

  • Recently announced accelerated buyback of shares. We expect further announcements in 2011 as CCK fully deploys its excess cash flow.
  • Recently speculated Mivisa, a private euity owned comp in Spain is being acquired by Blackstone highlights the attractiveness of the cash flows
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