Deutsche Bank Remains Cautious On Molson Coors

According to a recent report by Deutsche Bank, over the past 10 years, Molson Coors TAP has traded at an average 7.5x EV/EBITDA, so current 7.8x is only slightly above-average, and below global peers (9-10x). Deutsche Bank continues to think a discount is warranted. And while DB is not enthusiastic about growth in either of TAP's core markets, and view management as relatively shareholder- unfriendly, it is hard for DB to be outright negative, given already-conservative valuation and no signs that TAP's US market is sliding into outright loss of competitiveness. Deutsche Bank thinks a discount vs. the peer groups is warranted, not enthusiastic about growth in either of TAP's two core markets, and it views management as relatively shareholder- unfriendly in returning cash, specifically with a risk that healthy FCF and balance sheet could be diverted to M&A in the next few years. But given the conservative multiples, it is hard to become outright negative here unless we see signs that: TAP is coming competitively unhinged in either the US/Canada, being squarely beaten by the much larger ABI, or there is a big dilutive deal coming. In either case, a downtrend towards $40/share (6x EBITDA) is possible in Deutsche Bank's view. TAP closed Tuesday at $49.61