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    Stock Alert for Central European Distribution Corp. (CEDC)

    Central European Distribution Corp. (CEDC) is a producer of vodka and is Central and Eastern Europe’s largest integrated spirit beverage business.  CEDC produces the Green Mark, Absolwent, Zubrowka, Bols, Parliament, Zhuravli, Royal and Soplica brands, among others. CEDC currently exports its products to many markets around the world, including the United States, England, France and Japan.  The Company is also an importer of alcoholic beverages in Poland, Russia and Hungary. In Poland, CEDC imports many of the world’s leading brands, including brands such as Carlo Rossi Wines, Concha y Toro wines, Metaxa, Remy Martin Cognac, Sutter Home wines, Grant’s Whisky, Jagermeister, E&J Gallo, Jim Beam Bourbon, Sierra Tequila, Teacher’s Whisky, Campari, Cinzano, and Old Smuggler. CEDC is also an importer of premium spirits and wines in Russia with such brands as Concha y Toro, among others.

    Share Statistics (02-Feb-12)   FY

    2009

    FY

    2010

    %

    Chg

    Q3

    2010

    Q3

    2011

    %

    Chg

    Symbol CEDC Revenue, $Mn 689.41 711.54 3.2% 157.76 228.85 45.1%
    Current price $5.28 Gross marg. 50.6% 46.1% -8.9% 49.0% 40.7% -16.9%
    52wk Range: $2.75-$23.70 Oper. margin -3.3% -285.1%
    Avg Vol (3m): 2,314,430 Net margin 11.4% -14.7% -228.9% 63.3% -367.0% -679.8%
    Market Cap. 382.76M              
    Shares Outstanding 72.49M EPS, $ 1.60 -0.10 -168.8% 1.01 -2.01 -299.0%

    Source: Reuters.com, SEC Filings. –

    Investment Highlights

    Shares of vodka maker Central European Distribution rose as much as 28% to $5.69 Thursday, buoyed by news Russian billionaire Roustam Tariko proposed to raise his stake in the Company. This proposal is seen to help CEDC with its debt, while giving Tariko control of the Company’s management in Russia.

    CEDC have gained 33.0% in the last five days and 20.7% in the last month.  Year-to-date, the stock is down 77.6%.

    According to Reuters’ report, the transaction would see Tariko exchange up to $103 million in CEDC debt maturing next year into common shares at an exchange price of $7.00 per share. The investor also offered to assist the Company in addressing the remaining $207 million in debt maturing 2013, by potentially extending a backstop credit facility to CEDC.

    Russian Standard, which is controlled by Tariko, disclosed in an SEC filing that the proposal would enable it to increase its stake in CEDC to as much as 32.99% from 9.9% it currently owns. Tariko previously told Reuters that his Russian Standard intends to take management control of CEDC as part of an international expansion strategy.

    William Carey, CEO of CEDC, said his company would consider the proposal as well as other options it is currently exploring.

    Late in January, CEDC announced that First Drinks Brands, part of William Grant & Sons, will have the exclusive importation rights to Green Mark, Zubrowka and Kauffman Vodka in the UK.  The deal is seen to strengthen CEDC and William Grant & Sons’ international alliance, within which CEDC imports and distributes brands from William Grant & Sons’ portfolio in Poland and Hungary.

    CEDC shares rose 18.39% to close Thursday trade at $5.28.  Over 6 million shares have traded hands during the session, versus the 10-day average volume of over 1.26 million. Over the past 52 weeks, the stock has traded in the range of $2.75 – $23.70.  It is currently above its 50-day moving average of $4.26 and below its 200-day moving average of $5.76.

    Source:

    http://www.reuters.com/article/2012/02/02/cedc-idUSL4E8D25OE20120202?feedType=RSS&feedName=mergersNews&rpc=43

    http://finance.yahoo.com/news/CEDC-Signs-Agreement-With-prnews-2085938112.html?x=0

    Financial Summary

    CEDC reported net sales of $228.9 million for the three months ended September 30, 2011, compared to $157.8 million reported for the same period in 2010. Operating profit came in at $36.2 million as compared to $32.5 million for the same period in 2010.

    Operating profit in the recently reported quarter excluded the impact of a onetime, non-cash, impairment charge on goodwill and brands of $674.5 million, as well as other cost associated with restructuring and relicensing in Russia.

    On a U.S. GAAP basis, CEDC reported a net loss of $839.9 million, or $11.59 per fully diluted share,  for the quarter, compared to net income, excluding discontinued operations, of $68.9 million, or $0.98 per fully diluted share, for the same period in 2010.  In addition to the impairment charge, the comparable net income excludes the unrealized non-cash foreign exchange loss of $170.8 million from the revaluation of long term debt recognized during the period.  The number of fully diluted shares used in computing the earnings per share was 72.5 million for 2011 and 72.1 million for 2010.

    Source: http://finance.yahoo.com/news/Central-European-Distribution-prnews-2207350927.html?x=0&.v=1

    Financial Strength (02-Feb-2012)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.75 1.23 0.69 0.59
    Current Ratio (MRQ) 2.11 1.68 0.94 0.95
    LT Debt to Equity (MRQ) 182.89 44.62 24.69 94.90
    Total Debt to Equity (MRQ) 190.76 52.58 35.04 133.68
    Interest Coverage (TTM) -2.51 0.73 0.63 28.68

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    CEDC is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    The MACD for CEDC currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Feb02-2012 symbol Share, $ $ Mn 2011 2012 2011 2012
    Heineken NV HINKY 23.95 28.33B 14.43 14.17 1.29 1.26
    Iconic Brands Inc. ICNB 0.0004 21.01K n/a n/a n/a n/a
    Constellation Brands Inc. STZ 21.68 4.33B 10.58 9.81 1.63 1.57
    Beverages – Wineries & Distillers Median       16.43 n/a 1.52 n/a
    Central European Distribution Corp. CEDC 5.28 382.76M 25.14 10.56 0.42 0.41

    Source: Thomson Financial

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