Period    2Q13 / 1H13 

Actual vs. Expectations Guinness Anchor's ("GAB") 1H13 net profit of RM123m came in within ours and the street's estimates, making up 56.5% and 54.8% of ours and the street's FY13 full-year estimates of RM217.5m and RM224.6m respectively. 

Dividends   A single tier interim dividend of 20 sen was declared as expected.

Key Results Highlights   QoQ, the net profit of RM66.2m improved by 16.4% due to the better sales number (+9.5%) of RM429.4m. The improved sales were mainly due to the additional 9 days business freeze then for the implementation of its new IT system (Project Quantum) back in 1Q13, where the sales were only registered in the current quarter. 

 YoY, GAB's 1H13 net profit improved marginally by 1.6% from RM121.0m to RM123.0m despite the 10% drop on its revenue to RM821.7m. The slower sales in 1H13 were mainly due to the overall market softness. To recap, its 3M13 sales were much slower compared to the previous year due to the absence of stock-up activities prior to the Budget announcement. However, GAB still managed to increase its net profit marginally by 1.6% to RM123.0m, underpinned by a pre-tax margin improvement of 2.3ppt from 17.7% to 20.0% due to its improved product pricings in the malt liquor market and favourable product/channel mix. Management guided that the better sales of its bottled products as compared to its canned products had also contributed to the margin expansion.

Outlook   Moving forward, we believe that GAB will be able to deliver a good set of earnings in the next quarter (3Q13) as GAB has recorded strong sales in January due to the Chinese New Year celebration.

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 FY13 earnings. 

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

Source: Kenanga