Results

• Above expectations – FY14 revenue came in within expectations but PATAMI of RM211.2m came in above expectations, accounting for 107% and 109% of ours’ and consensus’ full year forecasts respectively.

Deviations

• Lower-than-expected operating expenses, D&A costs and effective tax rate.

Dividends

• Declared final and special dividend of 65 sen/share (4QFY13: 55 sen/share), totaling FY14 divided to 71 sen/share. This represents dividend payout and yield of 102.6% and 5.5%, respectively.

Highlights

• Malaysia: Revenue grew by 3.6% yoy in 4QFY14 mainly on the back of successful consumer campaigns. Operating profit improved with 2.9% growth mainly on the back of improved product and pricing mix as well as sound costs efficiencies measures.

• Singapore: Operations in Singapore continued to gain momentum, recording revenue growth of 27.6% yoy for 4QFY14 as it recovered from the completion of the group’s stock rationalization program in 1QFY14 coupled with improved consumer sentiments. Operating profit however declined by 11.7% due to higher trade marketing costs and excise duty.

• YTD: For FY14, revenue grew slightly by 5.1% largely from the 23.2% jump in Singapore’s revenue as Malaysian operations were flattish. The demand for beer remained weak domestically while the recovery in Singapore came from the completion of stock rationalization program and the acquisition of MayBev in Apr 2014.

• Despite the marginal revenue growth, operating profit managed to record a double-digit growth of 13.9% on the back of effective costs management programs in both Malaysia and Singapore. Pricing and product mixed also improved.

Risks

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

Forecasts

• We tweaked Carlsberg’s FY15-16 EPS by 2% as we take into account lower operating expenses, D&A costs and effective tax rate. We also introduced FY17 numbers.

Rating

HOLD

Positives

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

Negatives

• 1) Highly regulated industry; and 2) Potentialexcise duty hike.

Valuation

Post-earnings revision, our DCF-derived target price is raised to RM12.50 (from RM11.98). Maintain HOLD on the stock.

Source: Hong Leong Investment Bank Research - 2 Mar 2015