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Reasons we like General Mills●Market leaders
●Committed to innovation
●Committed to Shareholders
Company Background
-Sells products in over 100 countries
-General Mills was founded in 1928
-Currently the company holds more than 30 major brands
-History of innovative techniques: Shifting Consumer Demands
-Competitive Market Share
Company Background: Recent Events
-GIS bought Annie’s in 2014 to adapt to a shifting demand.
-Green Giant Sale- $700+ million.
-A recent Recall, has some worried, but is not to be feared
-Main competitor in the Cereal sector is Kellogs
Sector OverviewThe Packaged food industry is estimated to grow 4.5% in the next five years.
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SWOT ANALYSIS
● Rising demand● Industry growth rate
OPPORTUNITIES
● Net receivable is high● Possible Lawsuits
WEAKNESS
● Highly fluctuating input costs.● Less preference for processed foods
● Wide variety of product lines● Strong tradition of dividends.● International operations● Decrease in expenses● Increase in the ratio of operating cash flow to debt
STRENGTHS THREATS
Porter’s 5Buyer Power: Medium -- some switching costs, but few large retailers have power (Wal Mart)
Supplier Power: Medium -- contracts, raw materials are commodities
Barriers to New Entrants: High -- large start-up costs, high brand loyalty, distribution access
Threat of Substitutes: High -- generic brands, other options
Intensity of Competitive Rivalry: High -- many competitors, threat of substitutes, but GIS has good standing
Historical DividendsRegular dividends without interruption or
reduction for 117 years
Dividend growth at compound rate of 13% over the past 5 years
Steady dividend yield of 2.5% - 3.3% over the past 5 years
Payout ratio at 80.3%, average increase of 18.8% over 5 years
International Market Exposure● 30% in international sales, up from 17%
in 2011, with 2.6% average 5 year growth
● 60% in domestic sales
● Plans to expand further into international markets, but should be at a steady pace
Risk AnalysisHighly competitive and changing
sector.
Input prices have proved volatile.
Interest rates- Low amount of non-fixed rates.
Currency Fluctuations
Currency, Interest Rates, and Inputs have been financially hedged
Relative Valuation
ValuationsCorrelated with
our portfolio at .3397
DCF @ 6.5%
12% upside
Investment Thesis● Strong history of being market leaders in innovation
○ 150 new products last year○ Beat Campbell’s to healthy soups
● We expect net sales growth to remain 2-4%○ This serves as a solid foundation for company stability into the future
● Commitment to shareholder returns○ Strong Dividends--117 years○ Maintain dividend yield @ 2-3%
Recommendation: Buy at Market Price
Q&A