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Topic: Growth Stocks

Sale should lift earnings, cut risk

MOLSON COORS BREWING CO. $63 (New York symbol TAP; WSSF Rating: Average) has agreed to sell 68% of Kaiser, its money-losing brewery in Brazil, for $68 million in cash. The buyer has also agreed to assume $60 million of Kaiser’s debt.

To put these figures in perspective, the company earned $112.6 million or $1.44 a share in the nine months ended September 25, 2005. Following the sale, Molson Coors will still own 15% of Kaiser. That will help make it easier for the company to someday launch its Coors Light brand in Brazil.

The stock recently fell $6 after the company said that strong competition from low-priced beers and rising energy and other costs will cut Molson Coors profits in the fourth quarter of 2005, and possibly part of 2006.

However, the company will no longer have to consolidate Kaiser’s losses, which have been depressing its earnings. Selling Kaiser will also let Molson Coors focus on its core markets in North America and Europe.

Molson Coors probably earned $3.59 a share in 2005, excluding Kaiser and other unusual costs. It now trades at 17.5 times that forecast. The $1.28 dividend yields 2.0%.

Molson Coors is a buy for long-term gains.

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