Period  4Q13 / FY13

Actual vs. Expectations Guinness Anchor (“GAB”) reported FY13 net profit of RM217.6m which came in within our and the street estimates of RM230.3m and RM226.8m respectively.

Dividends  A 48.5 sen dividend was proposed as expected this quarter. To date, a total of 68.5 sen dividend was proposed for FY13, which is within our estimates of 68.6 sen.

Key Results Highlights  FY13 net profit grew marginally by 5% from RM207.4m in FY12 to RM217.6m underpinned by a subdued growth in revenue (+3%) driven mainly by its Tiger beer sales and better performances in the modern on-trade channel. Its pre-tax margin was flat at 17% as it incurred a higher financing cost (+55%) compared to FY12.

 QoQ, GAB saw a significant decrease in net profit by 45% to RM33.5m in 4Q13 underpinned by slower sales of RM412.1m (-7%). Seasonally, 4Q13 tend to be the weakest quarter for GAB due to the absence of festivities. Hence, its EBITDA margins declined 8ppt to 13% due to higher cost on promotional activities to drive sales.

 YoY, its 4Q13 net profit dipped 4% from RM34.8m previously to RM33.5m despite a strong growth in sales (+19%) due to higher cost incurred on brand building activities coupled with the investment in repacking its Heineken brand.

Outlook  Moving forward, we are cautiously optimistic on thebrewery segment due to the possibility of the implementation of GST and excise duty hike in the upcoming Budget, which could further dampen the industry malt liquor volume growth.

Change to Forecasts  We tweaked our FY14 earnings estimates lower by 7%, as we lower our volume growth assumption following the FY13 results.

Rating  Maintain UNDERPERFORM

Valuation  We lowered our TP from RM18.20 to RM16.52 following our adjustment in earnings forecast to reflect slower growth momentum in the malt liquor market. However, there are no changes to our WACC of 7.5%.

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

Source: Kenanga