Bear Stearns has reinitiated coverage of Grupo Modelo.

The analyst yesterday (1 April) gave the Mexico-based brewer a 'peer perform' rating, and set a price target for the end of 2008 of MXN54.49 per share.

Slowing exports of beer to the US, coupled with expected slimmer operating margins, meant that Modelo has few catalysts, Bear Stearns said in a report. The company's domestic business, however, should continue to perform well, with sales forecast to increase by around 7% this year and next.

Bear Stearns also suggested that the company could be the subject of a takeover bid in the future.

"Investors have tag-along rights if Modelo's control group sells. Investors who like Modelo's fundamental valuation may some day benefit from tag-along rights as we believe (Modelo shareholder) Anheuser-Busch may eventually tender for Modelo," Bear Stearns analyst Alan Alanis said in the report.

Last month, that net profit for the 12 months to the end of December rose by 5.6% on 2006, coming in at MXN9.50bn (US$879.6m). Total sales delivered a higher rise, meanwhile, climbing by 23.6% year-on-year to MXN72.89bn. Net export sales of Modelo's beers soared in the year, up 77.2% in value terms to MXN30.75bn, although the company was at pains to point out that export figures were non-comparable, due to a change in reporting status.

Operating income in 2007 leapt by 22.1% to MXN20.59bn. In volume terms, total sales, both at home and abroad, were up by 3.4% to 51.54m hectolitres.