- In a filing to Bursa Malaysia yesterday, Carlsberg Brewery (M) (CAB) said that it has exceeded the 10% threshold for a related party transaction (RPT) with Danish Malting Group Polska (Polska) as disclosed in its circular to shareholders (in relation to recurrent RPT) dated 26 March 2014.

- The actual contracted transaction value of the RPT for the period between Sept 2014 and April 2015 was RM3.5mil. This was RM2.5mil (or 250%) above the estimated transaction value of RM100,000-RM1mil disclosed in the circular.

- The main reason for the variance was an increase in raw materials (malts) procurement from Polska following a malt shortage at CAB’s main supplier, Danish Malting Goup A/S (DMG).

- According to the group’s 2013 annual report, the actual value transacted between CAB and Polska from 27 April 2013 to 28 February 2014 was RM100,000 – the smallest among its three suppliers.

- For the same period, the transaction value for CAB and DMG was RM17mil. CAB has another malt supplier, namely Slodownia Strzegom Sp.z.o.o, with which it transacted RM800,000.

- We gather that both Polska and CAB are subsidiaries (51%-owned) of Carlsberg Breweries A/S and that Polska does not hold any direct equity interest in CAB.

- We are neutral on this announcement as it is unlikely to have any material impact on CAB’s financials. If any, the impact will be forex (CAB transacts with DMG in Danish Krone and Polish zloty with Polska) or corporate governance-related.

- That said, we are placing our HOLD call and fair value for CAB under review given the recent decline in its share price. The group will be releasing its 3QFY14 results in the forthcoming week.

Source: AmeSecurities