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Hi tj,

Great questions. I think there are two things that need to happen for there to be a real catalyst for the stock: (1) The Euro fears have to subside to a larger degree and (2) Heineken needs to pay down about 25% more of its debt. If both those things happen, I see Heineken eventually being valued more in-line with its industry peers: 2x sales, 15x free cash flow. That alone would send the stock 50% higher.

The FEMSA acquisition (and the S&N acquisition eventually) will help Heineken sustain growth in the low-single digits. That may not sound exciting, but with the moves management is making to streamline costs, that could easily translate into 10%+ operating profit growth -- especially if energy and commodity costs stay flat or come down a bit.

So put together modest profit growth with a higher multiple to FCF, and I'm confident Heineken can be a solid market-beater from here.

As for your other question, I'm not too worried about Heineken's debt situation (just the size). They do have a big slug of debt ($2.0bn+) coming due in 2013, but the rest will come due from 2014-2018. And rates on most of Heineken's debt is in the 5 - 6% range -- more than manageable.

Thanks for checking out our Streetfighter portfolio. More picks to come!

Matt A.
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