Last Friday, Carlsberg Brewery Malaysia Berhad (CBMB) announced that it had entered into a share sale agreement with Capriwood SB to divest 70% of  its  equity  interest  in  Luen  Heng  F&B  SB  (LHFB)  for  a  total  cash consideration of RM19.5m. LHFB is an established distributor and supplier of imported beers, wines and spirits. (Source: Bursa Malaysia)

Comments:  Recall that  in 2008, LHFB was incorporated as a joint venture (JV)  with  CBMB  to  distribute  foreign  brand  beers  such  as  Hoegaarden, Leffe and Budweiser. We are positive as the disposal of its equity interest in LHFB  will  see  CBMB  focusing  more  on  its  core  beer,  stout  and  cider business  while  proceeds  from  the  sale  would  be  re-invested  into  its advertising  and  promotional  activity  (A&P)  for  its  core  beer  brands. Ultimately  impact  to  CBMB’s  core  operations  is  likely  to  be  minimal  as CBMB’s core brands comprise ~80% of group’s revenue.

Also, CBMB will continue  to  sell  selected  imported  beers  by  LHFB  in  order  to  maintain  its product portfolio and offerings to customers and consumers. We keep our earnings  forecasts  unchanged  at  this  juncture  pending  the  group's  1Q15 results release by month-end. Maintain NEUTRAL with an unchanged DCFderived TP of RM13.20.

Source: Affin Hwang Capital Research - 18 May 2015