Period    1Q13 / 3M13 

Actual vs. Expectations  The 3M13 net profit of RM56.8m came in within ours and the street estimates, making up 26.1% and 25.5% of ours and the street's FY13 full-year estimates of RM217.5m and RM222.7m respectively.

Dividends   No dividend was declared as expected

Key Results Highlights   YoY, the 3M13 revenue of RM392.3m was down by 12% to RM392.3m due to the absence of stock-up activities prior to the recent Budget announcement as the distributors had anticipated that there would be no excise duty hike in the Budget. Sales were also interrupted by a 9-day closed-off period for the migration of its existing IT infrastructure i.e. Project Quantum, which was launched on the 1^st  of Oct. Despite the lower revenue, the net profit (RM56.8m) still rose by 3% (RM55.2m) on the back of an improved EBITDA margin (+3.5ppt) of 21.4% due to a lower operating cost from the introduction of Heineken new bottle labelling that uses plastic instead of paper. 

 QoQ,  the net profit of RM56.8m improved by 63% due to the better sales number (+13%) of RM392.3m. This was mainly due to a seasonally stronger quarter for GAB and stronger Tiger and Guinness sales. The marketing season strategy is normally to push for sales in the 3Q of the CY onwards with marketing events such as Arthurs Day. Outlook   Moving forward, we believe that Guinness will continue to deliver another strong set of earnings next quarter (2Q13) given its extensive marketing plans in the coming months, i.e. Merry Guinness, Heineiken music festival namely  Thirst  with  Avicii, Justice and Above and Beyond, Tiger FC parties and etc.

Change to Forecasts No changes to our forecasts at this juncture. 

Rating   Maintain MARKET PERFORM

Valuation    Our target price of RM17.10 is based on a DCF valuation with a WACC of 7.5%, implying a PER of 23.8x to its FY12 earnings. 

Risks   Higher than expected excise duty hike, input cost and decline in its market share.  

Source: Kenanga