Carlsberg Brewery - Charging forward with premium beers BUY

• Carlsberg Brewery (Carlsberg) brewed a fine set of FY11 results with a higher net profit of RM166mil. Earnings met our expectation but came in 6% ahead of consensus.

• Top line growth for FY11 was a solid 9% YoY, owing  to higher revenues from both Malaysia (YoY: +8%) and Singapore (YoY: +12%), with increased beer consumption largely driven by a better sales mix and successful brand building activities. 

• But bottomline was up 24% owing to a 1.9ppt-EBITDA margin gain from productivity improvement and cost efficiency initiatives, which more than offset investments in new packaging design and new large bottles undertaken as part of Carlsberg’s global re-branding exercise. Earnings continue to be predominantly Malaysia-driven, with local ops making up 65% of group EBIT.  

• On a sequential basis, turnover and net profit fell by 17% and 24%, respectively. While a softer beer volume in 4Q was attributed mainly to some post-Budget de-stocking activities, net profit was dragged down by one-off restructuring expenses and write-down of inventories for slow moving stock in Taiwan. 

• Management declared total dividends of 67.5 sen/share comprising a final & special dividend of 65.5 sen less tax and a special tax-exempt of 2 sen. Total dividends of 72.5 sen/share for FY11 translate into a generous yield of 6%-7% based on the current share price. 

• No change to our recently revised FY12F-13F earnings forecasts. We now introduce a net profit of RM206mil for FY14F (YoY: 6%). 

• We maintain our MLM growth forecast at 5%-6% for 2012-13. We believe the industry is poised to extend its upward trend, buoyed by robust beer volumes on the back of UEFA European Football Championship special world event, and stable margins from steady raw ingredients. We anticipate intensified A&P by Carlsberg, which is the official sponsor of the football event, especially in the 4-6 weeks leading to match playoffs.

• We re-iterate BUY on Carlsberg with an unchanged DCFbased fair value of RM10.40/share. We remain upbeat about the group’s earnings prospects on the back of an expanding market share and deepening market penetration as driven by a strengthening product portfolio of premium beers. Net dividend yields of 5%-6% as premised on  a conservative payout of 70% per annum are also attractive.

Source: AmeSecurities