The name Anheuser Busch (ABI) might not ring a bell for many beer lovers. However, if I were to say that this Company brews famous brands like Budweiser, Corona, Beck’s and Stella Artois (to mention a few) you’ll appreciate what I have to say even more.

ABI doesn’t just make its beer lovers happy. It also made its shareholders happy. Year-to-date the shares of ABI have risen by 20.10% compared to the Euro Stoxx 50 which rose 18.50%. Worth toasting with a beer if you had to ask me!

So what makes this Company so special to be able to beat the performance of the index?

The following are some points which I believe give ABI a competitive edge over its competitors.

Revenues

Sales grew by 1.3% in Q115. This compares to a growth of 16.7% in Q114. However, 2014 reflected one-off sales from FIFA World Cup.

I am confident management will continue investing in opportunities to grow its brands and global platforms for the long term. Management expect sales to grow by mid to high single digits in FY15.

Managements’ forecasts are based on existing brands. However, it is important to point out that a large portion of growth comes from acquisitions. I expect the Group to continue adding on new brands to its existing range which will enable it to continue increasing market share and remain a dominant player in the industry.

Operating expenses

Management has managed to bring down operating expenses as a percentage to sales over the years. In 2014 there was a spike in operating expense due to a lot of cash being spent on advertising due to the world cup. This is understandable and I also expect the coming years to benefit from this ‘heavy’ advertising.

Operating Margins

The company has a history of reporting an improvement in margins year-on-year. I expect this positive trend to continue as the company continues to acquire new brands and tap new markets. Management have a proven track record of being able to take advantage of synergies and benefit from economies of scale.

Earnings

I expect earnings per share to continue to increase year-on-year both due to an increase in profitability due to the points mentioned above as well as a share buyback program which involves the distribution of cash back to shareholders.

Share Buyback

The $1 billion share buyback program announced on 26 February 2015 is progressing well and as of 1 May 2015 was approximately 47% complete.

Dividends

The company’s shares are trading on an attractive indicative gross dividend yield of 2.70%.

Conclusion

ABI should be considered as a core holding in a well-diversified portfolio. For investors who want a decent dividend yield, a share buyback program, a management team driving sales growth organically and through acquisitions and a steady improvement in margins and earnings, shares in ABI should be considered as a constituent in a portfolio.

This article was issued by Kristian Camenzuli, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.