During yesterday’s analyst briefing, GAB shed some light on
its brands’ performance (albeit no concrete figures were given) and its
near-term plans. GAB’s premium brands saw strong volume growth from posh bars and pubs, while
the early CNY boosted supermarket sales in December. It has also indicated its
intentions to raise prices starting from end-March and its tolerance for higher
debt levels. We raise our FY12-FY13 earnings forecast by 2.7-1.3% on higher volume
and price expectations. Maintain BUY at FV RM15.27.
Premium brands shine.
GAB’s 1HFY12 revenue grew by 15.8% y-o-y, largely driven by the following
two factors: (i) strong Guinness
and Heineken performance, with Heineken’s volume growing by double digits, and
(ii) the earlier-than-usual Chinese New Year for 2012. The modern on-trade
segment (posh bars and pubs) drove Guinness and Heineken’s volume growth, with GAB claiming that at least 80% of new
bars and contract renewals across the country choose GAB as their beer
supplier.
CNY effect comes
early. The earlier Chinese New Year, meanwhile, boosted the offtrade
segment (supermarkets) as consumers stocked up to entertain guests at home during
the festive season. Retailers and dealers have procured their supplies from GAB
in Dec 2011 in anticipation of robust consumer patronage in early January.
Hence, it is not fair to make comparisons between 1HFY12 and 1HFY11, as
1HFY12’s volume was skewed by the earlier-festive-season factor.
Asahi not seen as a
major threat. Given Carlsberg’s aggressive introduction of various brands
to target the premium beer segment, there will naturally be questions on GAB’s strategy
of maintaining its market share in this segment. Aside from highlighting Malaysian
drinkers’ brand loyalty, the company also mentioned Asahi’s weak presence outside
of Japan (Asahi is the beer Carlsberg
has chosen to invest in to
compete with Heineken). While emphasizing that the company will continue
to be prudent and not take competition lightly, GAB highlighted Carlsberg’s
unsuccessful attempts in the past to introduce new brands, including Tuborg (to compete with Heineken) and Skol (to contend with
Anchor).
Price increase and
potentially more borrowing. GAB will increase its prices at endMarch at a
rate of 3-4% following escalating raw material costs. We also gathered that while
GAB is comfortable with its current D/E ratio of 0.3x, it is receptive to a slightly higher ratio, thus implying that it
will potentially take on more borrowings (and/or dish out more dividends).
Capital expenditure for FY12 stands at around RM75m, which is higher than the
usual RM30m-50m per year due to a brewery infrastructure investment project.
Source: OSK188
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