Results

FY14 revenue came in within expectations at 100.2% and 100.9% of ours and consensus full year forecasts. However, earnings came in above expectations, accounting for 110.8% and 105% of ours and consensus estimates.Deviations

Lower-than-expected operating expenses.

Dividends

Declared final dividend of 44.5 sen/share (4QFY13: 48.5 sen/share), taking FY14’s dividend to 64.5 sen/share (FY13: 68.5 sen/share).

This represents total payout and yield of 98.3% and 4.9%, respectively.

Highlights

FY14 revenue declined marginally by 4% due to weak domestic consumption, competition from contraband beers and increased excise duty due to a new valuation method imposed by the Royal Malaysian Customs on 1 Nov 2013.

We note that there were no media releases regarding the above changes or any indication from our previous meeting with the company. Further details should be clarified during the analyst briefing later today.

Net profit was impacted further (-9.1%) as the decline in operating expenses were unable to fully offset the larger fall in revenue. The slight compression in net profit margin yoy was also due to higher tax rate (FY14: 12.34%; FY13: 12.96%).

Management continues to expect the domestic beer business environment to remain challenging from shrinking disposable income which would result in consumers scaling back on discretionary spending.

Despite the slightly negative prospect, the group would continue to drive its innovation strategy to refresh its brand portfolio, implement better costs discipline and costs optimization to result in improved productivity and efficiency.

Risks

• Excise duty hike after absence of 9 years
• Higher-than-expected raw material prices
• Lower-than-expected TIV
• Continuous decline in market share

Forecasts

Unchanged, pending further info during analyst briefing later today.

Rating

BUY

Positives – 1) Relatively 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

No changes to our BUY recommendation on Guinness Anchor Bhd and target price of RM15.77 based on DCF valuations, pending analyst briefing.

Source: Hong Leong Investment Bank Research - 22 Aug 2014