AB InBev: 30% Upside Based on Cash Flow

A New York presenter likes AB InBev (NYSE: BUD, $56.04) at this level. The largest global brewer is set to add $1 billion+ in cost synergies, following the 2008 merger, to the original target. Leverage reduction targets will be met 2 years ahead of plan, triggering a change in leadership incentive dynamics from debt paydown from the deal to share appreciation. The Street is misreading a recent slowdown in Brazil as indicative of future problems in the country, but the presenter disagrees. The comp growth in this all-important market for the company is set to resume shortly as competitors implement their price hikes to match BUD. Based on the presenter's FCF estimates, the upside from her ecould reach 30%. A substantial dividend increase as well as stock buybacks are strong possibilities.