Carlsberg Brewery - A bubbly year, indeed! BUY

- We maintain our BUY recommendation on Carlsberg Brewery (M) Bhd (Carlsberg), with an unchanged DCFbased fair value of RM14.00/share.

- Carlsberg wrapped up FY12 on a strong note, with a net profit of RM192mil (+15% YoY) which is within our, and market, estimates. Excluding a one-off gain of reversal from the overprovision of royalty expenses amounting to RM12mil in FY11, its YoY net profit growth would have been a greater 24%.

- Carlsberg’s FY12 earnings growth was underpinned by healthy revenue of RM1.6bil (+6% YoY). This can be attributed to robust sales following a well-received Chinese New Year (CNY) campaign in 1QFY12 and the UEFA Euro 2012 competition in June 2012, of which Carlsberg was one of the official sponsors.

- On a sequential basis, Carlsberg’s topline declined by 18% as a result of trade loading in 3QFY12, prior to a nationwide promotional campaign. QoQ, earnings was also down as Carlsberg kicked off its 2013 CNY A&P activities. We believe the later CNY date had also shifted some of its sales volume to 1QFY13F.

- With its portfolio leaning more towards the international brands, Carlsberg is poised to benefit from the growth of the premium segment (expected to be ~8% in FY13F). Its EBITDA margins had expanded by 1ppt in FY12 following the in-house production of ‘Asahi Super Dry’ and ‘Kronenbourg 1664’ on top of the mid-2012 introduction of ‘Somersby Apple Cider’. Moving forward, we expect EBITDA margin of ~17% for FY13F and FY14F.

- Carlsberg’s wholly-owned Singapore subsidiary Carlsberg Singapore Pte Ltd’s (CAS) revenue contribution was flattish YoY at 24%. Despite its topline growth of 6%, CAS’s EBIT came in at 3% lower YoY. Nonetheless, its EBIT margin of 20% is still higher than its parent Carlsberg’s by 4ppts-5ppts.

- Management proposed a final and special single-tier dividend of 58 sen/share for 4QFY12, bringing total gross dividends declared for FY12 to 63 sen/share. This represents a payout ratio of ~100%, in tandem with its trend in the past 2 years and translates into a yield of 5%.

- While some moderation in beer sales volume in FY13F is expected given the absence of any special events, we see stable sales momentum carrying through, on the back of the overall healthy pricing environment (excise duty status quo at RM7.40/litre) and positive consumer sentiment.

Source: AmeSecurities