Results

Within expectations – 1HFY14 PATAMI of RM92.4m came in within expectations, accounting for 48.5% and 48.2% of our’s and consensus full year forecasts respectively.

Deviations

None.

Dividends

Declared first interim dividend of 5 sen/share (2QFY13: 5 sen/share), in line with our estimate. This represents a payout and yield of 16.5% and 0.4%, respectively.

To note, the group have been consistently declaring interim dividend of 5 sen/share and another lumpy final dividend in 4Q.

Highlights

Revenue in 1HFY14 declined marginally by 1.6% from a mixture of decline from its Malaysia’s market (-3%), offset by the recovery in Singapore’s market (+3.5%).

Similar to GAB, Carlsberg also experienced the additional duty to be paid to the Royal Malaysia Customs, based on the amount of A&P spending made on its locally-brewed beer. Following that, the group has increased its selling prices by an average of 3.8%.

Singapore market experienced growth YTD largely due to the completion of its stock rationalization program that was carried out until Jan 2014. Following the increase in excise duty in Singapore, Carlsberg have increased its selling prices by 10%. Volumes were impacted in the first three months post-price increase (Mar-May) but recovery was seen thereafter.

Furthermore, its recent acquisition of MayBev (51% stake) in April 2014 would allow Carlsberg to market Asahi Super Dry and strengthen the premium beer portfolio of Carlsberg Singapore. To note, Asahi is Singapore’s 2nd largest premium beer brand in the country and we believe these synergies would allow Carlsberg to record further growth in both revenue and profit going forward.

Carlsberg’s bottomline in 1HFY14 experienced a growth despite the fall in revenue largely contributed by the group’s ongoing effective cost management, improve selling prices and product mix.

Risks

• Excise duty hike after absence of 8 years;
• Higher-than-expected raw material prices;
• Lower-than-expected TIV; and
• Continuous decline in market share.

Forecasts

Unchanged.

Rating

BUY

Positives – 1) High dividend yield stock; 2) Duopoly industry; 3) Resilient earnings; and 4) Low capex requirements.

Negatives – 1) Highly regulated industry; and 2) Potential excise duty hike.

Valuation

Maintain BUY with unchanged TP of RM13.77 based on DCF valuations.

Source: Hong Leong Investment Bank Research - 27 Aug 2014