Complimentary Boyar Research Report

Boyar Research has often found success investing in companies that contain great consumer franchises (often masked by a corporate name) that temporarily stubs their toe. Boston Beer (brewer of Samuel Adams Boston Lager and Angry Orchard) certainly fits this criteria.

Boyar Research recently produced a 17-page report on Boston Beer. Below please find a summary of our investment thesis (that appeared with the original report). To download a copy of our recent report on Boston Beer, please click here.

Shares of Boston Beer were a strong performer subsequent to our last profile in April 2009 increasing more than 12-fold to peak 2015 levels as SAM generated a 17% CAGR in net revenues and a 25% CAGR in diluted EPS between 2009 and 2014. However, SAM’s share price has faced significant pressure in recent years (down over 50% from peak 2015 levels) as growth began to slow in 2015. SAM’s recent results have been pressured as the craft beer industry attracted significant competition with the number of craft brewers increasing nearly 3-fold since 2010. In addition, SAM’s highly successful Angry Orchard cider brand (~60% market share) that was launched in 2011 and responsible for a large amount of recent growth, has also been under pressure. SAM has embarked on a number of initiatives to restore growth and generate improved profitability including new product introductions that cater to consumers’ preferences, a revamped management team that boasts significant industry experience and a renewed focus on cost savings. SAM CEO Martin Roper is heavily incentivized to unlock shareholder value with 876k long-term variable price options (~7% of outstanding shares). At current levels, SAM trades at just under 11x trailing EBITDA, representing a meaningful discount to recent precedent industry transactions that have occurred at ~13x. In an acquisition, SAM would likely command a significant premium given the potential for an acquirer to extract meaningful revenue and cost synergies. Applying a 12x multiple to our 2018E EBITDA we derive an intrinsic value of $204 a share representing 31% upside from current levels though we believe the Company would likely command at least a 15x multiple (over 60% above the current share price) in a transaction. Additional sources of upside could come from the deployment of SAM’s overcapitalized balance sheet ($77 million of cash and no long-term debt) toward continued outsized share buybacks and/or greater than expected cost savings.

To download a copy of our recent report on Boston Beer, please click here.

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