Monday, 1 June 2015

The top 100 brands in the world (part 3)

After looking through the top quarter of the amazing BrandZ top 100 brands in the world analysis over a couple of postings (link here and here) in this part of the analysis I will look at the brands ranked 26-55:

As in parts 1 and 2 I am going to compare brand value to EV (market cap plus net debt) and see what proportion of this EV can be attributed to the brand value per se and what proportion is more...operational.  The broad rule of thumb is that a high brand value of a company's EV may highlight value...especially if that brand value is going up. 

So what are the results? (brand value shown as a % of total company EV).  I am not going to show all the companies this time as unlike the top 25 there are starting to be a number of private entities (e.g. Subway) as well as brands which are just part of a broader business (e.g. Pampers, Gillette).  

So what are the five most striking companies on a brand value shown as a % of total company EV basis?

Hermes 48.7%
Starbucks 37.5%
FedEx 36.7%
BMW 36.4%
Nike 35.7%

Interestingly compared to parts 1 and 2 where I filtered at 40%+ only one name (Hermes) attained that level.  

Fascinatingly (although undoubtedly somewhat influenced by FX shifts) luxury good names have generally seen brand value reductions during the last year:

I wrote about Hermes last year and established a 'buy' price which is currently noticeably lower than the current share level (link here).  Time for another brand level review - to accompany the shares already identified for further analysis in parts 1 and 2. 

As for the other four stocks, well given I have already identified UPS in part 2 I will take FedEx no further.  

Elsewhere (outside Financial Orbit) I have reviewed BMW and noted that:

So one level is the 5% free cash flow yield mark which would suggest a c. Euro107.5 share price as being a noteworthy point.  I would apply though a further discount given the current material weakness of the euro and management guidance re China, hence I would stick with a ‘take profits’ view now, shift to ‘hold’ below Euro100/share and ‘buy’ below Euro90/share.  This would broadly be consistent with moving to ‘hold’ in the x7s EV/ebit FY15e and ‘buy’ in the x6s EV/ebit FY15e’ 

So the share flirting with falling below the Euro100 level is becoming more interesting essentially.  

Otherwise I took a look at Starbucks last year and wanted a lower share price. I will add it to the bottom of the 'high brand / EV' list but I am not compelled.  I will do the same with Nike which I have not formally looked at.  There are more compelling things to look at BUT they filter better on this metric than the norm.  So if there is time as the earnings season wanes...

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