Since hitting an all-time high of $15.40 in March 2013, Coca-Cola Amatil Ltd (ASX: CCL) shares are 41% down to about $9, in stark contrast to the 5.2% rise of the S&P ASX 200 Index (ASX: ^XJO) over the same time.
Higher pricing competition, lower revenue and weak earnings projections have taken their toll on the company's outlook. Some investors have headed towards the exit because the short-term view may not be so rosy.
The beverage bottler and distributor of the world's most famous soft drink in Australia, Indonesia, Fiji, New Zealand and PNG has been a long-time stock favourite, so when the business suffers a setback like this, it may just be the opportunity that investors are waiting for.
Here are four reasons shareholders might want to top up on their positions and keep their eyes on the longer-term view.
– Big block sale was bought up quickly
Last week on 13 June, a big $271 million block of the company's shares were sold off. It's hard to say exactly the reason, but most likely the seller had finally reached a point where the stock was no longer attractive and out it went.
Interestingly, the 30 million shares sold down were quickly gobbled up by investors who weren't put off by the forecast 15% earnings drop announced by the company.
– Revisiting 2009 share prices
This price level just above $9 a share hasn't been visited much since mid-2009. It may seem low, but it is still about four times book value per share, so the market still sees good value in the stock. Since the forecast earnings announcement, the stock has fallen about 20% and found willing buyers at this level.
– New group managing director and business restructure
Allison Watkins, the new group managing director and former CEO of GrainCorp Ltd (ASX: GNC), has extensive experience in beverages, retail and consumer goods, she will be overseeing the business restructure. By wringing out cost savings and streamlining the business, investors can look forward to improved earnings margins.
– Alcohol market and Asian expansion
Re-entering the alcoholic beverages market should help revenues and offer bigger earnings margins for premium drinks over the next few years. Also, the potential of expanding business in Indonesia, which has a population of about 250 million, or roughly 10 times Australia's, could help offset current market weakness.
