Coca Cola Amatil (ASX: CCL), Australia's resident Coke bottler, has been in the media crosshairs lately over its SPC Ardmona business. All the noise and the comparatively poor FY13 results generated as a result has seen Coca Cola's share price at its lowest ebb since early 2009. On the other hand, McAleese Limited (ASX: MCS) serves as yet another reminder why buying into an IPO is generally a bad idea.
Coca Cola Amatil
Our Coke bottler, fruit canner and would-be beer brewer extraordinaire is actually hitting its fourth 52-week low in three months, and at $10.96, it could prove to be a bargain.
Although its 2013 earnings were very poor, Coca Cola has largely sorted out its SPC Ardmona canning business, with Australia's two supermarket giants stepping in to provide stronger domestic demand. The supermarket supply arrangements should bolster Coca Cola's bottom line, and reinforce the confidence needed for its foray into the brewing business and southeast Asia.
There are a number of risks associated with the transition overseas, most notably cultural ones associated with the entry of Coca Cola into primarily Muslim nations like Indonesia. Given the (highly negative) media coverage followers of that religion often receive in Australia, it's easy for an investor to perceive overseas Muslim nations as strongly anti-Western and surmise that companies like Coca Cola face significant barriers to entry.
Regardless of the truth of that assumption, I think Coca Cola stands a solid chance of success overseas. For starters, it's a universal product – tastes great, provides a rush and is mildly addictive, and secondly, no one does brand research like Coke. Even if the formulation of Coke we buy here clashes with a southeast Asian palate or culture, Coca Cola Amatil is smart enough to do taste testing and culturally-targeted advertising.
The key to selling beverages is making people want to drink the product, and creating that desire is one of Coca Cola's greatest strengths. Coca Cola Amatil bottles more than just Coke, with their range including iced teas, nutrient waters and so on, further broadening their appeal. Time will tell, but I and a number of other Foolish contributors think Coca Cola Amatil provides a solid buyers opportunity at its current price.
McAleese Limited
The story is very different for McAleese, whose prospects for recovery are very different to Coca Cola's. While it may be technically unfair to cover McAleese in a list of 52-week lows (as an IPO, any price below its issue price is a 52-week low), I feel the falls are severe enough to warrant its inclusion. McAleese is down 68% from its listing at $1.47, to its current price of ~$0.485 as a result of losing several big contracts and restructuring its subsidiary, Coote's Transport.
McAleese's current price does not reflect a buying opportunity. At least not so soon after its IPO, not before you see an annual report, and not before more contracts show up to take the place of the outgoing petroleum contracts. It is possible that investors who buy at these depressed prices will see the face value of their shareholding rise. However, I also think that a purchase now would be more fairly described as gambling. Without concrete earnings and profitability info, investors are purchasing based on the face value of the company, not on the underlying cogs that make money. In the absence of any serious positive news, I think that McAleese could well have further to fall.
An honourable mention to Oroton Group
Investors looking for another great potential growth story at low prices should check out last week's 52-week lows for more info on Oroton Group (ASX: ORL), which is up only 3 cents since that time.
Foolish takeaway
The most important thing to take away from these 52-week low articles is that the share price is not a good measure of whether a company is a great investment. Investors need to look past the smoke and mirrors to see if there are any positives hidden from the public eye. With Coca Coca Amatil the answer is yes; southeast Asian expansions and beer brewing in Australia, plus improvement in SPC Ardmona. With McAleese at this stage, the situation is quite different.
