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Fevertree - shall I, shan't I?

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richfool
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Fevertree - shall I, shan't I?

#94476

Postby richfool » November 9th, 2017, 5:23 pm

I was having a look at Fevertree and whether I should continue to hold it, and I came across the two rather conflicting articles below.

"Why I’d buy pricey Fevertree Drinks plc ahead of this cheap growth stock"
http://www.fool.co.uk/investing/2017/11 ... wth-stock/
and:

"Fevertree Drinks plc isn’t the only growth stock I’d sell today"
http://www.fool.co.uk/investing/2017/11 ... ell-today/

Acknowledged that individuals may have different viewpoints or perspectives, but it doesn't do much for the credibility of an organisation if two of their writers publish what amounts to directly conflicting recommendations.

Lootman
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Re: Fevertree - shall I, shan't I?

#94488

Postby Lootman » November 9th, 2017, 5:46 pm

Tough one. I bought it a couple of years ago in one my rare "Peter Lynch" moments. Their products so transformed my favourite tipple that I had to buy its shares.

Naturally it's done very well and I haven't been tempted to sell, nor to buy more. Part of the complication there is that it is in my AIM-IHT portfolio and so if I sold it I would have to quickly find another AIM share I liked at least as much to replace it, and they're all pretty expensive right now.

It's also in my taxable account so CGT is an issue.

So, all in all, a hold.

ADrunkenMarcus
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Re: Fevertree - shall I, shan't I?

#154867

Postby ADrunkenMarcus » July 25th, 2018, 7:56 am

Richfool, did you decide to continue to hold it?

Best wishes

Mark.

richfool
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Re: Fevertree - shall I, shan't I?

#155031

Postby richfool » July 25th, 2018, 4:09 pm

ADrunkenMarcus wrote:Richfool, did you decide to continue to hold it?

Best wishes

Mark.

Hi, Mark. No, I did sell it. I then held it indirectly through Independent IT (IIT), but have since take the profit there.

Currently, I have some exposure through SLS (Standard Life UK Smaller companies trust).

Lootman
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Re: Fevertree - shall I, shan't I?

#155234

Postby Lootman » July 26th, 2018, 8:24 am

My Fevertree position is up 430% since I bought it, and the unrealised gain exceeds the annual CGT allowance.

So I guess I am keeping it, given that I already used up my 2018-2019 CGT allowance.

I just hope there is not a takeover that won't let me avoid the gain. I imagine one of the big food or beverage companies might be interested.

Still, a nice problem to have.

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Re: Fevertree - shall I, shan't I?

#155444

Postby ADrunkenMarcus » July 26th, 2018, 7:46 pm

richfool wrote:Hi, Mark. No, I did sell it. I then held it indirectly through Independent IT (IIT), but have since take the profit there.

Currently, I have some exposure through SLS (Standard Life UK Smaller companies trust).


I have a chunky holding of SLS, as it makes up almost one-fifth of my SIPP. However, hindsight is wonderful and I wish I'd bought into Fevertree. I did look around 2300p but thought it was priced to perfection. Silly me!

Best wishes

Mark.

ADrunkenMarcus
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Re: Fevertree - shall I, shan't I?

#157272

Postby ADrunkenMarcus » August 5th, 2018, 10:57 am

I'm giving more thought to Fevertree. I don't think future returns will be as high as those to date, but there's a lot to like about the company in terms of its margins and high ROCE. Their pre-tax profit is less than £100m and the revenues are under £300m so on that basis it's still not an enormous company.

For me, I think a key issue is if they can expand successfully overseas. If so, there's surely a lot of growth potential which would offset future P/E contraction. If not, they've grabbed quite a share of the UK market so aren't they getting close to maxing it out? Simply maintaining their share of the market would limit them to the market growth.

Any thoughts?

Best wishes

Mark.

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Re: Fevertree - shall I, shan't I?

#157328

Postby Lootman » August 5th, 2018, 1:36 pm

ADrunkenMarcus wrote:For me, I think a key issue is if they can expand successfully overseas. If so, there's surely a lot of growth potential which would offset future P/E contraction. If not, they've grabbed quite a share of the UK market so aren't they getting close to maxing it out? Simply maintaining their share of the market would limit them to the market growth.

That is exactly what they are doing, successfully so far:

http://fevertree2.d3r-cdn.com/pdfs/orig ... -final.pdf

Pendrainllwyn
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Re: Fevertree - shall I, shan't I?

#157337

Postby Pendrainllwyn » August 5th, 2018, 2:20 pm

A great product. As for overseas expansion I regularly see it in Hong Kong (bars and shops) and the USA where I used it to make a delicious Washington Mule a few nights ago.

Don't own the stock unfortunately. I had a cursory look at it when I came across the product a year or so ago. It will forever be a reminder to me to not let strong price appreciation put me off going through my usual valuation approach. I must get around to that even now.

Pendrainllwyn

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Re: Fevertree - shall I, shan't I?

#157366

Postby ADrunkenMarcus » August 5th, 2018, 4:59 pm

It does seem to look good so far Lootman, so we have revenues in H1 2018 of

    £58m for the UK;
    £15m for the United States;
    £26m for continental Europe;
    £5m for the rest of the world, with good performances in Australia, Canada and South Africa

In fact, the split is already £58 million for the UK and £46 million in revenues for the world. The distribution agreement for the United States sounds very promising. On a population basis, the USA is 4.8 times larger than the UK, which might imply revenue potential of £281 million (assuming they matched the UK revenues of today). Of course no two markets are the same. The USA is also much richer on a per capita basis.

Based on the % of revenues given in the H1 2017 presentation, the revenues then were:

    under £34m for the UK;
    £13m for the United States;
    £22m for continental Europe;
    £3m for the rest of the world

Therefore we see c. 17% revenue growth in the United States; 18% for Europe; 67% for the rest of the world. And the UK grew about 70%.

Proportionately, the UK makes up more revenue in H1 2018 than it did in H1 2017: the split is UK / International 56% / 44% in H1 2018; and 47% / 53% in H1 2017. International sales have grown but are a larger proportion of revenues than the same period a year prior.

And I noted profit margins and ROCE rising, plus net cash on the balance sheet. I suppose I should remove this cash for valuation purposes. It does appear that revenue forecasts for the full year of 2018 show revenue growth some 50% greater than market consensus.

Best wishes

Mark.


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