Michael SprungLakeport Brewing Income FundTFR.UN.TODON'T BUYSep 19, 2006
Will be paying a special dividend. Brewing is a tough business. They have done very well but not sure this is the type of firm he would be looking for in a trust for long-term earnings stability.
They are in the value segment of the beer market. ($1 a beer!) Have recently had a $28 offer by Labatt’s Brewery, which is about a 35% increase to the trading price. If you own, he suggests you tender to the offer.
A well-run trust. Very innovative marketing strategy. A lot of distribution growth potential. Do a good job of controlling costs. Low payout ratio. Trades at about 9 EBITDA.
7.6% yield. The problem with the smaller breweries is the economies of scale and whether they are able to compete. To compete, they have to have very loyal customers. Not sure if in the long-term they have the scale to compete effectively.
Low priced beer. Likes the management. If the big brewers become active, there is a competition risk and they would have to adjust accordingly. Sold his holdings when the valuation went up.
Brewer in the lower end pricing. They have performed exceptionally well. Very well managed business, but from where it is trading here he would be a seller. Competition is growing.