Livewire Equities

BoA Merrill Lynch has said that Coca-Cola Amatil's (CCL) future sustainable earnings growth cannot justify the stock's valuation. The broker estimates that the soft drink giant is trading on 6-8 times PE ratio to earnings growth. Although the broker has maintained its outperform recommendation on the stock, it has slashed its earnings forecast for FY2013 by 7.6 % to 68c. Even after the large drop in 2013 financial year earnings, we believe it is difficult for Coke to deliver more than 2-3% growth in FY14-15, it says. This is because of the slowdown in its core soft drink business, which its alternative growth sources (the Indonesian market and alcohol) will not be able to offset, BAML argues. It has a 12-month price objective of $10.50 (last close $12.47). (VIEW LINK)


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