Ed Woolfitt, Head of Trading at Galvan
On May 20th brewer SABMiller reported a profit before tax of $3,803m, up from $3,405m the year before. Total beverage volumes of 261m hl were in line with the prior year on an organic basis.The Latin American region reported a 17% increase in earnings before interest, tax and amortisation to $1,386m. The figures were slightly below Charles Stanley forecasts. The broker predicted group profit before tax of $3,885m, earnings before interest, tax and amortisation of $4,425m and revenue of $26,100m.
For an operation the size of SABMiller, even a slight miss on profits represents some pretty substantial numbers. The profits miss reported this month is compounded by the pedestrian fundamental performance in Latin America, and given the bearish technical picture and recent strong run by the shares, Galvan Research recommend taking profits down to our target of 1,733p
Shares in SAB Miller have been hit by an April / May double top above 2,000p. While below this figure the likelihood is that the shares will retrace and test the 200 day moving average at 1,733p.
The market punishes SABMiller shares after the full year profits disappointment.
The strong recent momentum continues, as the market takes the view that the profits miss is already in the price
Source: Galvan Research and Trading