Coca-Cola FEMSA, S.A.B. de C.V.'s (KOF) common stock has appreciated significantly since our previous update, closing at MXN71.26. The increase primarily reflected positive investor sentiment relating to the possible synergistic benefits arising from the merger with Fomento Económico Mexicano, S.A.B. de C.V.'s (FEMSA) underperforming beer business. In light of proposed synergy benefits and as KOF's results were broadly above our estimates, we expect to revise our estimates and target price upwards. As a result, although the target price does not support a HOLD rating we reiterate the common stock a HOLD and will reassess our target price and rating in our 3Q 09 update report. As we expect significant positive currency impact on the ADR over our 6-24 month investment horizon and since the target price supports a BUY we maintain our BUY rating for the ADR (1 ADR = 10 common shares). We will reassess our target price and rating in our 3Q 09 update report.

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