San Miguel Brewery has had a 'buy' rating initiated on its stock by Citigroup.

The broker, which was the lead underwriter for SMB's IPO in the Philippines last month, said today (20 June) that the company, part of food and drink conglomerate San Miguel, could benefit from a better product mix and its recent alliance with Kirin. The raw material purchase partnership could help reduce cost pressures, Citigroup said.

In a research note, Citigroup said it saw profitability in the drinks division, despite a mature domestic market.

A price target of PHP10.30 per share was set for the drinks division.

San Miguel launched its IPO in the Philippines last month, when its shares opened at 8.30 pesos (19.54 US cents) on 12 May, up 3.8% from the IPO price of 8.00 pesos. By late morning, shares were trading at 8.10 pesos. San Miguel said at the time that it intends to use funds raised through the IPO - estimated at reaching up to PHP6.16bn (US$147m) - to pay down debt and finance its expansion into heavy industries.

Kirin holds a 20% stake in San Miguel Corp., SMB's parent company.