Recommenda

Target
tion:
Price:

Moderate
292.96
sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

Recommendation
Shareprice (20/11/14)
308.99
:
293
Target price:
-5.2 %
Potential:

Share price
performance

Since 1st January

2014
+14.01%
Variation:
314.00
Highest:
265.20
Lowest:
5-year
performance
Variation:
Highest:
Lowest:

+137.70%
314.00
115.00

Equity
performance- LTM

France

Company
In 2013, the Group Bel achieved good results with sales growth
by 5.3% and an operating income increased by 10.9% year-onyear to 234 million. It is important to underline that the second
half of the year was less good in term of results. The main
reason is that raw material prices have risen sharply since the
middle of 2013.
Despite its growing strategy for 2014 the uncertain economic
conditions in some markets and the ongoing process of rawmaterial price increase is damaging on the year's activity and
profitability. In addition to that the fast development of local
competitors on the emerging markets will strengthen the
competition to capture new market shares.
In the first half of 2014, the consolidated sales are up 1,7% but
the operating income fall to 38,9% compared to last year. The
Group's sales efforts were not enough to offset the sharp
increase in raw material prices and the negative foreign
exchange impact.
After two consecutive years characterized by 6.25 dividends
level, the Group Bell does not seem able to follow the same
policy for 2014 and a decline in dividend and market price is
expected.
The Bell stock is almost at its highest level of the year and is
overvalued and expected to drop in price during the next
months.

Recommendation on Bel Group equity

Our recommendation on Bel equity is Sell for a share price performance at 293
Our financial valuation on the equity is based on the following multiples: 7.7x EBITDA NTM and
0,77x Revenue NTM

Recommenda
Target
tion:
Price:

Moderate
292.96
sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Bel Group overview (1/2)

Bel Group or Groupe Bel (in French) is a multinational cheese marketer centered in France.
The Bel Group, based in the 8th district of Paris, manufactures and distributes processed and half-processed
cheeses, frequently packaged in individual portions. The company tablissements Jules Bel was founded in
1865 in Orgelet in the Department of the Jura.
The Laughing Cow, Babybel , Kiri, Leerdammer, Boursin are Bels five core brands that are
distributed on five continents. Bel has made international growth a strategic focus since 1929, when the Group
sets up its first subsidiary abroad. In the early 1970's, after initially expanding into European markets, Bel sets
its sights for the African continent, with the establishment of its first operations in Morocco. Today, the Group
operates in 33 countries with 27 production sites on five continents, and the company sells its products in over
120 countries, reflecting steady international growth over Bel's long history.

Sales breakdown by product

Sales breakdown by location

Multinational cheese marketer centered in

France:

Bel Group is established in 33 countries.

Example: The Laughing Cow, Babybel,

Kiri, Leerdammer, Boursin, etc.

57% of sales generated by cheese

portions

68% of sales generated by 5 largest

brands

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Bel Group overview (2/2)

Bel Group shareholder structure

Case study of Boursins acquisition in 2007

Fromageries Bel SA, the listed French dairy products manufacturer and distributor, agreed to acquire Boursin,
the French cheese manufacturer, from Unilever Group, the listed UK based consumer goods supplier, for a
consideration of EUR 400m (USD 579m).
The sale will enable Unilever to focus on segments outside the cheese category. As a part of Fromageries Bel
SA, Boursin will be exposed to further growth and brand development opportunities. The acquired entity has
generated an annual turnover of EUR 95m (USD 137.4m) in 2006 with approximately 150 employees.
Boursin expects sales of EUR 100m in 2007 with half of the revenue generated in France and the rest from the
other European countries, North America, and Asia.
Revenue multiple: 4.2x

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Bel Group environment analysis

SWOT analysis

STRENGTHS

WEAKNESSES

Strong brands image

Lots of subsidaries

International presence

Environemental issues due to packing

Great place to work for employees

Too many R&D expenses

OPPORTUNITIES

THREATS

New markets in Asia and South

America

Strong variation of milk prices

New products coming in the market

(snacks)

Competitions of private labels (WalMart, Carrefour)

Cheese has still a good image

Health issues

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Bel Group share price performance since January 2011 (vs. CAC 40)

Key facts in 2014

Market conditions remain challenging, with high raw material prices, significant foreign
exchange volatility and increased political instability in some world regions.
The Group's sales efforts were not enough to avoid the 82 M (-38%) decline in operating
income for the first half of the year.
Further, the Group recognized non-recurring expense of some 10 million to cover
financial costs arising from the decision to move the company's headquarters in 2015.
The Bell stock is overvalued and not anymore in line with the current results. The share
price is expected to drop in the coming months

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Group Bel relevant similar companies

Companies

Key indicators

Description
Bright Dairy & Food Co., Ltd is engaged in the
development, production, and sale of milk and dairy
products in China. The company offers pasteurized milk,
fresh milk, yoghurt, ultra-high heat pasteurized milk, milk
powder, butter and cheese, and fruit juices. It is also
involved in the rearing and fostering of milk cows and
bulls; logistic distribution; and the development,
production, and sale of health and nutrition products. The
company is headquartered in Shanghai, China.

Emmi AG is engaged in the development, production,

and marketing a range of dairy and fresh products
worldwide. The company primarily focuses on fresh
products, such as lifestyle, convenience, and health
products. Its dairy products comprise milk, cream,
butter, yoghurt, milk drinks, curd, and desserts. The
company is also involved in production, ageing, and
trade of cheese, including hard, semi-hard, and soft
cheese; fondue and raclette; fresh cheese and
mozzarella; and processed cheese.

Bongrain SA produces and distributes cheese and other

dairy specialties, and dairy ingredients in France, other
countries in Europe, and internationally. It provides
various cheese products, such as soft, fresh, pressed,
and processed cheeses for use in cheeseboard, cuisine,
salads, spreads, sandwiches, snacks, aperitifs, etc. The
company is also involved in the production of other dairy
products, including creams, technical butters, desserts,
whey, powder, and fats, as well as milk-based nutrients
and functional ingredients.

Parmalat SpA, together with its subsidiaries, produces

and distributes milk, dairy products, and fruit beverages.
The company operates in three segments: Milk, Dairy
Products, and Fruit Beverages. The Milk segment offers
UHT, pasteurized, condensed, powdered, and flavored
milk products, as well as cream and bchamel. The Dairy
Products segment provides yogurt, fermented milk,
desserts, cheese, and butter. The Fruit Beverages
segment offers fruit juices, nectars, and tea.

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Group Bel financial valuation

Valuation area

1,383 M

1,690 M

1,718 M

2,100 M

2,159
M

Equity Value
en M

2,639 M

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector: price
Country:
Food and Beverage

France

Valuation Discounted Cash Flow Method (1/5)

Beta Determination
From competitor comparison

Bel Group competitor (Beta) :

Bright Dairy,
Emmi,
Bongrain; and,
Parmalat

Leveraged

Unleveraged

0,94
0,66
0,51
0,41

0,92
0,58
0,32
0,48

Average :

0,58

Bel Group releveraged Beta :

0,68

Group Bel historical financial structure

173,4 M

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Valuation Discounted Cash Flow Method (2/5)

Cost of capital determination
CAPM

Ke

We used CAPM model with the following parameters:

Ke=Rf + x (Rm-Rf)
Risk Free Rate (Rf):
Expected market rentability (Rm):
Beta (B):

1,50% (OAT 10 ans)

c. 12%
0,68
Debt cost

8,7%

Kd

Cost of financing by debts for Bel Group

Source : investors presentation

4,5%

Impact of the capital and debts

Stock exchange capitalization

2,399 M (i.e. 93%)

Net Debt

173 M (i.e. 7%)

Company value (incl. Minority Interest)

2,573 M

Therefore a WACC of 7,5%

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Valuation Discounted Cash Flow Method (3/5)

DCF hypothesis
Our
estimations

Considerations

Croissance
1,5% growth. des

Growth decrease (high competition

Croissance
des ventes
from
emerging country)

EBITDA

10.0% EBITDA
margin

Price increase of raw materials

(margin decline)

Investments

4% of revenue.

Correlation with historicals

Investissements
amortizations and investments

Amortization

4% of revenue.

Difference between EBITDA and

EBIT Amortissements
margin according historical
profil

NWC

4% of revenue.

Historical NWCBFR
analysis

Croissance
1,0%.

Expected
Croissance
growth
long terme
mondial

Sales increase

Long term
growth

ventes

long terme

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Valuation Discounted Cash Flow Method (4/5)

DCF valuation results

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Valuation Discounted Cash Flow Method (5/5)

DCF valuation sensibility
Company Valuation Sensiblity:

PGR

WACC

Equity Value Sensibility:

PGR

WACC

Target Price Sensibility :

PGR

WACC

Recommenda
Target
tion:
Price:

Moderate
292.96

sell

Overvalued stock expected to drop in

Sector:
Country:
price
Food and Beverage

France

Valuation Stock exchange comparable method

Thus a Group Bel equity evaluation of approximately 293