- We maintain our SELL rating on Guinness Anchor Bhd (GAB) with an unchanged fair value of RM14.70/share.

- After its AGM yesterday, GAB revealed its first new product in 3 years, called Tiger Radler. The product is a blend of its iconic Tiger beer and natural lemon juice which makes it sweeter, and less alcoholic than the normal beer.

- According to GAB’s managing director, Hans Essaadi, Malaysia is the first country in Asia where Tiger Radler would be available. The beer, which will be brewed locally, will be officially launched on December 1. It is part of Heineken NV’s (GAB’s ultimate parent) global rollout of Radler drinks which mixes lemon soda and lager.

- In addition to Tiger Radler, GAB said that a new line extension for Heineken will also be introduced in December. The group is said to be testing 5-7 new products (a combination of new variants and line extensions) currently.

- We gather that the brewers are stepping up their efforts to find beer alternatives amid changing consumer preferences. As it is, malt liquor market (MLM) volumes (80% of domestic alcohol market) have shrunk of late. While management is confident of a moderate growth in volumes next year, we, however, are less optimistic given that consumers are still facing declining disposable incomes.

- GAB’s current strategy of product innovation and push into the premium/super premium segment is similar to its competitor Carlsberg Brewery (M) Bhd’s (SELL, FV: RM10.60/share) growth approach in the last 3 years. Carlsberg launched Asahi Super Dry, Kronenbourg 1664 and Somersby Apple Cider, which saw it taking the lion’s share of market in the top-end MLM segment. The segment is supposedly less price sensitive and appeals to the younger generation of drinkers.

- Separately, management reiterated its dividend policy of 95%, which is similar to ours. We expect gross dividends of 72 sen and 75 sen for FY14F and FY15F, respectively, translating into yields of ~4.5%. The group has also allocated capex of RM50mil, which can be internally-funded given the group’s strong balance sheet.

- Management said that it has no immediate plans to increase beer prices in FY14 given the status quo of excise duty in Budget 2014, unless there is a change in its cost base. We do not rule out any potential hikes given that prices have been raised by 3% in April/May in the last few years. 

Source: AmeSecurities