We held several conversations with the company over the next few months. Based on what we heard in our conversations, we became very interested. In December 2001, we visited CEDC in Warsaw. We came away impressed by the management’s vision and the company’s opportunity. In particular, we liked that the Polish alcohol market was highly fragmented, but consolidating. Therefore, we believed that CEDC was likely to significantly increase its market share. Also, for several years, Polish consumers’ tastes in alcohol had been moving up-market. Moreover, Poland’s economy was growing rapidly, and would further benefit when it joined the EU. Finally, our financial models projected that CEDC would be able to sustain EPS growth in excess of 25% for several years.
We issued our CEDC report in May 2002 and took the management on the road in June 2002. At the time that we issued our initial report on May 15, 2002, the stock was about $5.00 (adjusted for splits) and traded for only about seven times earnings. However, once we began to work with CEDC, the stock price and volume picked up significantly. As Bill Carey, CEDC’s Chairman / CEO, wrote to us after the road show, “I wanted to drop you a quick line to thank you for a successful week last week with potential new investors. We were impressed by the quality of meetings and the depth of the questions.” One year later CEDC had almost doubled.
Over the past five years, CEDC’s market cap has grown from less than $50 million to about $1 billion. Its average daily trading volume increased from 48,000 shares to over 200,000 shares.