GAB’s 1HFY13 earnings of RM123.0m (+1.6% y-o-y) were within estimates, with the later timing of the Chinese New Year this year pushing sales into 3QFY13. An improving product mix, where more drinkers consume relatively pricier beers, lifted profitability although beer sales have seen tepid growth as of late amid rainy weather conditions and increased spending awareness. A new MD, who has 20 years’ experience with Heineken and four in the Middle East, will come onboard next month. We keep our forecasts unchanged and maintain our FV at RM17.47.
Within expectations. GAB registered 2QFY13 revenue of RM429.4m (-8.3% y-o-y, +9.5% q-o-q) and earnings of RM66.2m (+0.5% y-o-y, +16.4% q-o-q) due the later timing of the Chinese New Year (CNY) this year – in February compared to January last year – which had pushed annual CNY purchases to 3QFY13, resulting in a decline in 2QFY13 revenue. Jan 2013 sales volume was nearly 80% higher than that seen a year earlier, where CNY buying was mostly concentrated in Dec 2011. 1HFY13 revenue and earnings of RM821.7m (-10.0% y-o-y) and RM123.0m (+1.6% y-o-y) were also lukewarm for the same reason, although an improving product and channel mix helped to drive bottomline growth. GAB’s 1HFY13 earnings represent 54.1% and 54.8% of our and consensus estimates. 1H profits have, on average, accounted for 55.8% of its full-year earnings since FY06. We expect a substantially improved 3QFY13 on a y-o-y basis, driven by the later timing of CNY sales this time around.
Softening volume growth. GAB has noticed a slowing increase in beer volumes of late, possibly driven by i) the recent rainy weather, which affected on-trade sales, and ii) increased spending consciousness ahead of the general election. The company thinks that consumers may be holding tighter onto their wallets in anticipation of policies that may lead to lower disposable income, e.g. the introduction of the GST and a potential reduction of the petrol subsidy. Our forecasts reflect a 4.0% volume growth for FY13 and FY14.
Within expectations. GAB registered 2QFY13 revenue of RM429.4m (-8.3% y-o-y, +9.5% q-o-q) and earnings of RM66.2m (+0.5% y-o-y, +16.4% q-o-q) due the later timing of the Chinese New Year (CNY) this year – in February compared to January last year – which had pushed annual CNY purchases to 3QFY13, resulting in a decline in 2QFY13 revenue. Jan 2013 sales volume was nearly 80% higher than that seen a year earlier, where CNY buying was mostly concentrated in Dec 2011. 1HFY13 revenue and earnings of RM821.7m (-10.0% y-o-y) and RM123.0m (+1.6% y-o-y) were also lukewarm for the same reason, although an improving product and channel mix helped to drive bottomline growth. GAB’s 1HFY13 earnings represent 54.1% and 54.8% of our and consensus estimates. 1H profits have, on average, accounted for 55.8% of its full-year earnings since FY06. We expect a substantially improved 3QFY13 on a y-o-y basis, driven by the later timing of CNY sales this time around.
Softening volume growth. GAB has noticed a slowing increase in beer volumes of late, possibly driven by i) the recent rainy weather, which affected on-trade sales, and ii) increased spending consciousness ahead of the general election. The company thinks that consumers may be holding tighter onto their wallets in anticipation of policies that may lead to lower disposable income, e.g. the introduction of the GST and a potential reduction of the petrol subsidy. Our forecasts reflect a 4.0% volume growth for FY13 and FY14.
A new captain to steer the ship. Hans Essaadi, GAB’s new MD come 1 March 2013, made an appearance at the company’s analysts briefing yesterday evening. Prior to his appointment to the company, he was based in the Caribbean and Europe with Heineken. His last posting was in the Middle East. His experience there may well prove useful as he gradually adapts to the business environment in Malaysia and he learns more about the various sensitivities surrounding alcoholic beverages in a multi-cultural, multi-religious nation.
Maintain BUY. We keep our forecasts unchanged and continue to value GAB at a FV of RM17.47, based on a FCFF valuation (WACC: 7.1%, terminal growth: 2.2%). We continue to like the company’s strong portfolio of brands across all price points, its commanding market share and stellar corporate governance. Nevertheless, potential threats are regulatory uncertainties post-general election and an increasingly fierce competition from Carlsberg for market share.
Maintain BUY. We keep our forecasts unchanged and continue to value GAB at a FV of RM17.47, based on a FCFF valuation (WACC: 7.1%, terminal growth: 2.2%). We continue to like the company’s strong portfolio of brands across all price points, its commanding market share and stellar corporate governance. Nevertheless, potential threats are regulatory uncertainties post-general election and an increasingly fierce competition from Carlsberg for market share.
Source: OSK
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