Results

• FY15’s net profit of RM214.4m came within expectation, recording 103.8% and 99% of consensus expectations, however revenues of RM1749.1m came in above expectations, accounting for 107% of ours and 104% of consensus estimates.

Dividends

• Declared final dividend of 51 sen/share (4QFY14: 44.5 sen/share), taking FY15’s dividend to 71 sen/share (FY14: 64.5 sen/share). This represents a total payout and yield of 100% and 5.5% respectively.

Highlights

• FY15 revenues recorded a growth of 8.6% yoy, despite a challenging year. Volume growth of 6.7% in FY15 is attributed to overall market recovery and to an extent the measures taken by the Royal Malaysian customs in combating contraband beers. Consequently, PAT increased by 8.2% yoy.

• Qoq, revenues fell by 9.1% to RM397.6m in 4Q15, this is attributed to the record low consumer sentiment and the vacuum post GST implementation in April. Recall that GAB’s 3Q15 was a relatively strong quarter, due to stocking up pre GST. Despite this, PAT grew 11.45% qoq due to timing of marketing expenses and overall better-cost management.

• Anchor beer lead the growth in the beers portfolio, resulting from ‘pricing strategy optimization’ and to an extent, the renewed focus in brand activation and commercial activities with the traditional on trade channel. ‘Tiger Radler’ gave the Tiger brand a lift; Tiger still maintains its dominance in the market. We believe innovation will keep driving the company, Radler and Smirnoff saw GAB venturing into the RTD and “near beers” categories, refreshing its portfolio.

• Management believes that the outlook for FY16 will still remain challenging as consumers are still expected to remain cautious with their spending for the next 3-6 months. Furthermore, the weakening ringgit has created cost challenges for the group moving forward.

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

• We adjusted our base volume assumptions for FY16-17 based on latest figures to account for GAB’s volume growth. Consequently FY16-17 EPS increased by 9.5% and 13.6%.

Rating

HOLD

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

• Maintain our HOLD recommendation, TP is increased to RM13.48 (previously RM13.25) as we roll forward our DCF valuation.

Source: Hong Leong Investment Bank Research - 17 Aug 2015