Beacon Equity released a new research report on Nascent Wine Company, and awarded the stock with a $4.00 target price. Nascent is Mexico’s only nationwide distributor of imported food and beverage products. It distributes foods and beverages to more than 8,000 locations across Mexico, including supermarkets, superstores, convenience stores, mom and pop markets, restaurants, hotels, resorts, cafeterias, schools and industrial caterers.
Future acquisitions will be folded into Nascent’s existing infrastructure, enabling the Company to gain consolidation benefits such as reduced overhead and delivery costs. Additionally, most future acquisitions will likely be of regional players. Nascent will be able to extend its nationwide presence by expanding distribution of the regional product lines it acquires to additional markets.
The food service industry in Mexico primarily consists of many medium-sized and small independent companies. According to the Ministry of Economy, there are 30,000 Mexican companies specializing in food product manufacturing. Of these, only 8% are large or medium-sized companies. The majority are very small businesses, which causes fragmentation in the food service market and creates significant value creation opportunities for large consolidators such as Nascent.
The analyst stated, “Since our initial report, the Company has made noteworthy progress in expanding its operations, employing an acquisition-based strategy similar to the strategy Sysco Foods used in the early 1970s to expand in the US market. In the first seven months of 2007, Nascent has acquired three large distributors of food and beverage products to the Mexican market. The Company is currently positioned as the only nationwide distributor of imported products in Mexico and a leading food and beverage distributor overall, with 8,000 sales outlets.”
She concluded, “Nascent should be able to leverage its nationwide presence by extending distribution of the regional product lines it acquires to additional markets. In view of the Company’s recent acquisitions, strong revenue expansion, focused growth strategy and favorable market outlook, we reiterate our Speculative Buy rating for Nascent and confirm our $4.00 price target.”
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