Suntory Needs To Optimize Japan And Expand Its Growth Opportunities

In contrast to Kirin (OTCPK:KNBWY), which I wrote about the other day, Suntory Beverage & Food (OTCPK:STBFY) ("Suntory") has a more promising record of managing its non-alcoholic beverage businesses and realizing value from its foreign investments. Nevertheless, while Japan's sluggish beer market isn't a concern here (Suntory Beverage & Food is a subsidiary of Suntory Holdings and doesn't participate in alcoholic beverages), Japan's non-alcoholic beverage market isn't offering much growth potential either, and Suntory will need to maximize its profitability here while exploring better growth opportunities outside Japan.

I believe management will succeed in these efforts, but there are ample risks and uncertainties regarding timing and magnitude. Suntory is already investing to develop market opportunities in Africa, but the company hasn't yet done much with China, India, or Latin America. While I'm looking for the company to generate low single-digit growth due to its heavy reliance on developed markets like Japan, Australia, and Western Europe, that is still sufficient to support a fair value about 10% above today's price.

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Suntory Needs To Optimize Japan And Expand Its Growth Opportunities