Source of opportunity
The acquisition of SABMiller improves ABI’s ability to grow, increases its market shares and end-market concentration and diversifies its revenues. As a result, ABI appears a better business now than it was 12 months ago. Synergy targets look achievable, and we expect them to drive CAGRs of 9% in EBITDA and 13% in EPS over 2017-19. In 2020, we expect ABI to acquire again; in our forecasts, we assume an US$80 bn deal that adds 8% to 2020E EPS. A FCF yield of 5.0% in 2017E (4.4% for European staples) is compelling for a business that has doubled every four years. With 19% upside to our 12-month price target, we reinstate with a Buy rating.