The Sarasota-Poland Connection
05/09/2003 12:00 am EST
What do Sarasota, Florida,–incidentally the home of The Money Show's parent company, InterShow–and Poland have in common? Sarasota happens to be the home base of an unusual firm which imports beer, spirits, and wines into Poland through 8,000 retail outlets. Here’s Leo Fasciocco’s review of this unusual stock, the advisor's latest technical breakout favorite.
"Central European Distribution (CEDC NASDAQ) has annual revenues of $300 million. Technically, the stock is a leader, breaking out from a four-month flat base with a big expansion in volume. The stock is also trading at about four times its normal volume. A daily chart shows that CEDC is under excellent accumulation. The stock should do well near term since it has made a new high, which should draw in buying from the ‘new-high crowd’.
"The company imports and distributes more than 800 brands of beer, spirits, and wines in Poland through 8,000 retail outlets. It also has a small mail-order operation. Its spirits include those made by Allied Domecq, Bacardi, and Diageo. Other brands include Foster's, Guinness, and Miller beers and Robert Mondavi wines. The company also distributes bottled water, soda, and cigars. The firm is the largest distributor of domestic vodka on a nationwide basis in Poland. It operates 41 regional distribution centers in major urban areas throughout Poland and distributes many of the world's leading brands, including brands such as Johnnie Walker, Sutter Home, Mondavi, and Concha y Toro wines, Corona, Beck's, Foster's, Budweiser, and Guinness Stout beers.
"Vice chairman Peterson and CEO William Carey, together own more than 40% of the stock. For the first quarter, the company posted a 94% jump in earnings on an 87% surge in revenues. The company said it expects net $2.20 to $2.25 a share for this year, about a 40% increase from the $1.59 a share a year ago. Going out to 2004, we anticipate a 16% gain in net to $2.60 a share. The stock has a modest price-earnings ratio of only 13. Earnings are doing well due to increased market penetration and improving gross margins. The company has also been active in making acquisitions in Poland that have boosted earnings per share.
"Central European has the bullish spirit and everything going for it. Earnings are strong, the stock is breaking out and volume is increasing. We are targeting a move to 38 within the next six months. The fundamentals support the notion the stock can go higher. Aggressive investors can take a full position. More conservative investors can scale in. A protective stop can be placed near 26. Overall, we rate this stock as an excellent intermediate-term play because earnings for the next three quarters will be very strong. The stock is not overpriced. Given a p/e of 20, the stock has potential to get to the mid-to-high 40s based on this year’s earnings."