Pepsi bottler Dubai Refreshments' stock is readying for an economy lift
With its wide beverage portfolio and solid financials, bottler can find its stride soon
The UAE economy is on the mend, and surveys indicate more than half of the businesses have recovered from the impact of COVID-19 on their operations. To add to the positivity, companies are boosting hirings and planning to hike salaries.
Moreover, the Expo should increase the floating population in the next six to eight months. The UAE is one of the most vaccinated nations, with almost 67 per cent of the population fully inoculated. This data should boost the confidence of visitors to the UAE.
One listed company that can capitalize on these is Dubai Refreshments Co., the authorized Pepsi bottler for almost 60 years. In addition, a higher population means the 'Total Addressable Market' (TAM) increases, which should boost its topline and bottom-line. Furthermore, the company has carbonated beverages, iced tea, water, fruit-flavored and energy drinks, and ice cream, enabling it to cater to a diverse clientele. A number of vending machine touchpoints across Dubai broadens its geographical coverage.
Closing in on pre-pandemic numbers
The results are improving along with the reopening of the economy. While revenue is yet to reach its pre-pandemic level, Q1-2021 was at Dh133.5 million compared to Dh142.1 million a year before. As the economy inches towards a faster recovery and the commencement of the Expo, this would act as significant catalyst for the group’s top-line turnaround.
Net profit was reported at Dh18.8 million, a 100 per cent jump from Q4-2020, indicating the success in bringing down costs and increasing the shareholder value. Dubai Refreshments' dividend yield stands at 3.68 per cent with an annual payment frequency, with payouts even during the pandemic indicating sustainability and profitability on the company’s path.
Curtail those debts
Dubai Refreshments has a strong balance-sheet structure with cash recorded at Dh146.8 million for th first quarter, a 10- and 23 per cent surge from Q4-2020 and Q1-2020, respectively. The company is making efforts to reduce net debt, a 15 per cent reduction from same quarter last year. A significant cash-on-hand would help the group continue making its dividend payouts and perhaps plan other ways of expansion to retain its strong consumer base.
The UAE market offers a demographic benefit with its sizeable share of a youth-skewing population, which would benefit the company’s product portfolio. This beverages seller seems to be well-positioned to exploit such favorable dynamics.