Coca Cola bought Huiyuan Juice

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(Update Sept 5) It seems there are anti-trust concern about this acquisition. Some source says if this merge approved, Coca Cola will have 40% of juice market share in China. Another concern is, like many Chinese companies (Sohu, Netease), Huiyuan is actually registered in Cayman Island, theoritically it is M&A between two foreign companies. It seems the recently approved Chinese Anti-trust law did not say clearly how to treat such cases. Maybe my wife (China licensed attorney) will know.

(Update Sept 3) More analysis at 21cbh in Chinese. Coke paid about a PE of 42 for Huiyuan, not surprisingly high considering the huge potential in Chinese juice market.

(Original) It was not too long ago Huiyuan Juice, one of the largest juice producer in China, went public in Hongkong Stock Exchange. Now Coca Cola (NYSE: KO) is buying it for 17.9 billion HKD, at more 200% premium of the stock closing price (4.14 HKD) as of August 29. Coke is paying 12.20 HKD per share.

Chinese story at 21cbh. English story at Bloomberg.

Huiyuan Juice factory pic
(source: the standard)

The ticker symbol for Huiyuan is 1886.HK.


Weekend thoughts w/e 050308

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Here is a link to Q&A transcript of Berkshire Hathaway 08 shareholders meeting. I believe this is more comprehensive than CNBC’s live blog I posted earlier.

Berkshire first quarter earning
It went down more than 60% over same period a year ago (PDF). But the number does lie sometime, because this is mostly from paper loss of very long term derivative. One may wonder how come Buffett got into this derivative thing? Isn’t that risky?

Well, in a way we are all invovled in this derivative world. Think auto insurance. When we pay premium for car insurance, it’s like buying a put for our cars and the insurance company is selling the put. If the underlying (car) got demaged, we will be paid by the insurance company for the loss. But most of times our cars are fine, and the insurance companies make money. We all know insurance is Berkshire’s main business and Buffett’s expertise area. My point is Buffett is not new to derivative. He is the financial guru of our time. While his main expertise is buying common stocks and business (in which he emphasize the moat, the durable competitive edge), he also has good understanding and made money on bonds, commodity and foreign currency etc. One interesting example I read from his latest annual letter is he bought Amazon Euro (junk) bond after dot com bubble: he got upsides both from the apperication of Euro and Amazon itself a few years later.

Chinese speaking representative in BoA
We went to the local BoA branch, and to our surprise, one of the financial representative speaks Chinese (Mandarin). He said he had worked in Beijing. One thing I heard is foreigners in Beijing tends to learn Chinese, while those in Shanghai don’t. On a related matter, it appears the interest of learning Chinese is rising among foreigners.

Food stocks


Coffee, espresso, coke and investing: II

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The Coca Cola stock vs. Starbucks stock
In last 10 years (Mar 6 1998 to today Feb 28 2008), according Google Finance, SBUX went up from 4.93 to 18.78 (+280%, split adjusted, SBUX has not paid any dividend). That’s about 14% price appreciation annually.

On the other hand, KO went from 68.66 to 59.56 (-14.44%). But there is a caveat, Coca Cola pays out a cash dividend each quarter, so we should adjust the dividend when calculate Coke’s return.

Life Tips

Coffee, espresso, coke and investing: I

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The caffeine effect
Which one has the most caffeine? A tall (12 fl oz, or 355 ml) brewed coffee, a tall latte with one shot of espresso (both at Starbucks), and a can (12 fl oz) classic Coca Cola?

Your instant answer maybe the latte (espresso), but the correct answer is the brewed coffee. According to Starbucks Nutrition By the Cup (PDF), 12 fl oz coffee has 240 mg caffeine, one shot espresso (1 fl oz) has 75 mg caffeine. As to Coke, I saw it says “caffeine content: 34mg per 12 fl oz”.

I don’t know what is the appropriate amount of caffeine a person could consume daily. My guess is one small cup a day should be ok for most people. I think it also depends on person’s health condition (weight, height, habbit of drinking). But just like many other things in life, moderation is the key. A cup of regular coffee will get one refreshed in the morning (it has caffeine equivalent to 7 cups of Coke). But when the initial effect of coffee goes away in a few hours, he/she will resort to another coffee. And so on. I think we can be more easily get caffeinated that way.

starbucks coffee cup size pic
(picture souce: will work for food)