Within estimates. GAB posted 4QFY12 revenue of RM346.0m (-0.8% y-o-y, -5.1% q-o-q) and profits of RM34.8m (+19.8% y-o-y, -32.4% q-o-q). Revenue declined marginally on a y-o-y basis as the company focused on increasing its domestic malt liquor market (MLM) volume and made a substantial, albeit gradual, reduction in export and duty-free volumes. Meanwhile, top- and bottom-line dropped on a sequential basis as the Chinese New Year boosted its 2Q and 3Q profits. Full year FY12 revenue grew 9.1% y-o-y, lifting full year earnings to RM207.4m (+14.3% y-o-y), as growing beer consumption and a better product mix provided profit growth both from increased volumes and wider margins per litre of beer sold. The year's earnings represent 98.3% and 100.8% of our and consensus forecasts.

8.8% MLM volume growth. GAB further gained market share within the Malaysian brewery industry for the 11th consecutive year as its FY12 MLM volume grew 8.8% y-o-y, outpacing the market's 4.7% expansion. Guinness and Heineken, the leaders in the stout and premium lager segments respectively, were the outperformers for the firm, with Heineken in particular receiving an added lift from its RM35m new packaging project. GAB estimates show that MLM volume for the company has risen at a 8.3% CAGR since 2006. The market, in comparison, saw volume grow by 5.0% annually. As a result, the company's market share continued its rise to 60.3%, a 2.3 ppt increase from the previous year.

90%-95% payout. GAB declared a final dividend of RM0.55 per share, bringing the year's total to RM1.25 per share (including a RM0.60 per share special dividend), the firm's highest on record. That's slightly higher than our RM1.23 per share dividend forecast and represents a 7.9% dividend yield. Recurring dividends were 20.4% higher than that of FY11. The company has historically guided dividend payouts of 85%-90% of total profits but is now revising this informal policy to 90%-95% for FY13 onwards. We are keeping our payout ratio assumption unchanged at 90%.

No new MTNs, no special dividends in the near term. With some RM200m of its RM550m borrowings facility still remaining, the question generally arose on GAB's plan to further gear up its books. With no major capital expenditures expected for the few years aside from those that are already on-going, however, the company currently has no plans to issue new medium term notes (MTN). MD Charles Ireland also pointed out that another special dividend will be unlikely for the next 2 to 3 years.

Heineken ' APB deal. GAB doesn't expect any major changes (if there are any changes) to its operations should Heineken successfully acquire APB. What the deal will do, however, is simplify GAB's stakeholder structure. GAPL, a 50:50 JV between Diageo and APB, holds 51.0% of the company. GAB's board thus contains representatives from Diageo, F&N, Heineken and APB. With the acquisition, major stakeholders will simplify to just Diageo and Heineken.

Maintain BUY. We are keeping our FY13 and FY14 forecasts unchanged at RM227.5m and RM247.6m respectively. Our FV is also kept unchanged at RM17.47, based on our FCFF model (WACC: 7.1%, terminal growth: 2.2%). GAB is our preferred brewery and sin sector pick.

Source: OSK