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Dec, 30 2015

New CEO at Starbucks helps Tata Global Beverages 4.2% stock jump

TGB stock is trading at a trailing price-earnings multiple of 36 and is 28 per cent below its record high of Rs 181.7, hit in November 2012. Its market cap is slightly higher than its trailing four quarters revenues of Rs 7,987 crore.

The stock of Tata Global Beverages (TGB) jumped 4.2 per cent on December 17. The gain was impressive given that the stock is down by over four per cent for the year. The trigger it announced a change of guard at one of its most promising ventures, Tata Starbucks, prompting a relief rally on the Street, reported ET.

In the past, new CEOs have positively impacted the stocks of fast moving consumer goods (FMCG) companies. HUL, Britannia and Marico have witnessed gains on bourses after these companies appointed new leaders. A change in the top management of the Starbucks venture stems hope for a faster turnaround of the business.

The three year old joint venture, still loss-making, has opened 78 outlets in India. It was the last major trigger that pushed TGB stock up 77 per cent in 2012. The stock has since been a laggard on the Street, a reflection of the company's performance off the Street.

The global economic slowdown has impacted tea consumption resulting in the company's major business of black tea not doing well. The past two years have been particularly challenging for TGB characterised by single-digit revenue growth and operating margins of 7-8 per cent.

Its latest acquisition of MAP brand in Australia has allowed it to enter into the fast-growing single serve segment. Through coffee pods, the company is looking at making inroads into the developed markets of the US and Canada. While a rapid growth momentum may still be couple of years away, the company could just be at an inflection point in its growth trajectory.

TGB stock is trading at a trailing price-earnings multiple of 36 and is 28 per cent below its record high of Rs 181.7, hit in November 2012. Its market cap is slightly higher than its trailing four quarters revenues of Rs 7,987 crore.

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