- We maintain BUY on GAB with an unchanged DCF-derived fair value of RM15.80/share.

- Heineken N.V. yesterday announced that it has acquired Diageo plc's stake in GAPL Pte Ltd – the majority owner (51%) of Guinness Anchor Bhd (GAB) – as part of a wider asset swap deal worth USD781mil. The remaining 49% stake in GAB is publicly traded.

- Quoting the media statements of both companies, the three-part transaction “brings increased focus to their respective beer businesses and certain licensing arrangements in Jamaica, Malaysia, Singapore and Ghana”.

- Heineken’s latest move further strengthens its foothold in Southeast Asia and reflects its optimism in this region. Recall that in 2012, Heineken had battled with Thai Beverage PCL for control of Asia Pacific Breweries Ltd (APB), which was then run by a JV company equally held by Heineken and Fraser & Neave Ltd (F&N). Following the disposal of its entire stake in APB to Heineken International on 15 November 2012, F&N had ceased to be an indirect major shareholder of GAB.

- At present, Heineken already holds the majority stake in GAPL (slightly above 50% through APB), but will have full ownership post this acquisition. Heineken’s management believes this to be important, as it would then be able to steer the investment and strategic direction of the company and be better positioned to enhance the potential of its brands given greater commercial control.

- We deem this news to be neutral to GAB and thus make no changes to our FY16FFY18F earnings estimates.

- The exit of Diageo is not expected to negatively impact GAB’s portfolio of brands as Diageo will be engaging in long-term agreements with GAB for the brewing and distribution of Guinness and other Diageo beer brands in Malaysia and Singapore. (Guinness, Kilkenny, Malta, Anglia and Smirnoff are brands under Diageo while APB owns the Tiger and Anchor brands. GAPL is also the licensee for Guinness and ABC Stout distribution for the Singapore market).

Source: AmeSecurities Research - 8 Oct 2015