I've been looking for a reason to hold PBG any longer... here is a short version of my thinking for what it's worth
:
(a) Sales volumes will be under pressure for 2Q 08 and 1Q 09 whilst consumers get over their saddness. (Supposedly 1Q 08 good!). Maybe Xmas will surprise and interest rates kick in but market is seemingly not banking on it. Adjustment not enduring;
(b) Gross margins will be under pressure because of xchange rates. Some claw back opportunity in form of manufacturers margin (predominantly Chinese) and maybe keener logistics and distribution costs. First 6 months basically PBG immune given forex hedge strategy and significant inventories. Margins pressure therefore not overwhelming and PBG have some time (aka small window) to refine cost of goods sold composition... target as per results presentation. Possible impact will be neutral if can claw back non inventory pruchase costs (eg labour reductions, logistics)
(c) Interest rates could be an interesting variable in FY10... Possible impact 'exciting';
(d) Debt is not a pressing issue although approx 50% (circa $420M) needs to be rolled FY10. Suspect in interim bankers (who were instrumental in building current market mayhem!!) will want to play Jesus and 'monitor' non debt reduction initiatives aka distributions.
(e) Balance sheet full of intangibles but tidy...inventory holdings might get a workout in current year to maybe free up some cash. Great opportunity to challenge exsiting inventory logistics model and refine further... possible outcome positive;
(f) Management seem competent and are stable. Actively manage risks and appear transparent
On balance:
- uncertainty (and probably over reaction) in p&l consequential of forex and sales volumes;
- misplaced hysteria re debt rolls in mkt place;
- suspect fund manager (452 Capital - significant shareholder) is or has adjusted its position (down) (although no significant shareholder notice)
and so share price under pressure. Importantly, cannot see a catalyst for change in which case price likely to drift lower. A 'left field' buyout low probability given complexity of financing any deals. Nonetheless PBG in time will present as good value at current prices.
For me, I can't stand limp share prices so I'll close out. The bottom is hard to pick!
Lastly, these are my thoughts, I am not an advisor and I've lost heavily in the market. Therefore Do your own research. Good sources include annual reports and attached presentation.
Good luck today