Results

9MFY13 revenue of RM772.5m came within expectations, accounting for 72% of FY13 revenue. However, net profit of RM184.1m beats our estimates as well as consensus’, accounting for 82.1% and 81.2% of FY13 full year forecasts respectively.

Deviations

Lower-than-expected operating expenses.

Dividends

None. Dividends are usually declared semi-annually. We are keeping our dividend per share assumptions of 75.7 sen for FY13, with no special dividends to be declared.

Highlights

Qoq: 3Q revenue reported a marginal growth of 3% were mainly driven by CNY sales and promotional activities. However, profit was lower with a decline of 7.6% due to higher costs invested in commercial activities to promote sales for CNY.

Yoy: Revenue grew 21.3% mainly from the strong sales garnered during the pre-stocking for CNY (as well as timing of CNY) and St. Patrick’s Day celebration. However, profit growth were slightly behind at 18.7% as there were higher operating expenses and depreciation & amortization costs incurred during the quarter.

YTD: Marginal decline of 1% in revenue shows the signs of market softening in the industry as guided in the previous briefing. However, earnings managed to claw back up with growth of 8% on the back of improved costs management as well as favourable product and channel mix.

Revenue/day: Despite registering growth in sales, our estimates of revenue/day showed a marginal decline of 0.6% (from RM4.64m/day in 9MFY12 vs. RM4.61m/day in 9MFY13). This continued to support our cautious take on the brewery industry throughout 2013.

According to the press release issued on its outlook going forward, management mentioned that GAB’s profit growth is expected to be mitigated by modest growth in the MLM, rising costs of raw materials and the availability of contraband products.

Risks

1) Excise duty hike after absence of 8 years; 2) Higher-thanexpected raw material prices; 3) Lower-than-expected TIV; and 4) Continuous decline in market share.

Forecasts

FY13-15 net profit forecasts raised by 7-8% to account for lower COGS and opex assumptions. As such, EPS is expected to grow between 5-16% for FY13-15.

Rating

HOLD


• Positives – 1) High dividend yield stock; 2) Duopoly industry; and 3) Resilient earnings and low capex requirements.
• Negatives – 1) Highly regulated industry; and 2) Potential excise duty hike.

Valuation

• Post-earnings revision, DCF-derived target price is raised by 9.8% to RM18.35 from RM16.71 previously. Given that share price have run almost 20% over the past 2 months and total potential return is within our house range of +/-10%, we keep our HOLD recommendation unchanged.

Source: Hong Leong Investment Bank Research - 15 May 2013