9MFY21 CNP came in within both our and consensus’ expectations. While the 9MFY21 CNP of RM129.3m made up just 62% of the full-year estimates, we see a strong finish to the year, expecting a sharp recovery in the final quarter on the reopening of the economy compared to prior quarters dampened by lockdown measures. Moving forward, we maintain our FY21E CNP but reduced FY22E CNP by 7.5% after factoring the Prosperity Tax. Maintain our MARKET PERFORM call and TP of RM23.10.

Within expectations. Despite 9MFY21 core net profit (CNP) of RM129.3m (+4.0% YoY) making up just 62% each of our and street’s expectation, we deem this as not surprising, given that its local operation was disrupted by its brewery suspension, coupled with intermittent disruptions in distributions and dine-in restrictions that badly impacted the HoReCa channel.

Results reflected expected pandemic impact. YoY, 9MFY21 top-line decreased 6.2% YoY to RM1.2b as the Malaysian operation reported lower revenue of RM817.1m (-13.1%) due to the suspension of the brewery operations for a period of 11 weeks which led to disruptions in distribution & export sales. However, this was mitigated by its Singapore operation which registered a higher revenue of RM413.4m (+11.6%; due to growth in volume & value, reported growth in off trade channels, including e-commerce and the shorter lockdown period than the previous year). In addition, the more prudent stance which was taken by the group resulted in lower marketing cost (deferment of marketing activities), cost savings derived from the rationalizing of activities implemented previously and the absence of the Bill of Demand (RM6.4m:- incurred last year). Its strengthened financial position is reflected by the EBIT margin which expanded 130bps to 13.0% from the previous corresponding period. In addition, domestic operating margin also showed significant improvements by 260bps (14.1%) despite Singapore’s operating margin dwindling 90bps (10.1%).

QoQ, Stringent measures taken by both countries to combat pandemic infections resulted in 3QFY21 turnover remaining flattish at RM349.3m (vs. RM349.2m in 2QFY21). In terms of segmented revenues, decline in Malaysia revenue to RM216.9m (-14.6%) was offset by an increase in revenue from its Singapore operation which reported revenue of RM132.4m (+25.1%).

Looking ahead, CAB is poised to gain in the longer-term due to further easing of lockdown measures (extended operating hours of F&B outlets, upliftment of dine-in restrictions for the fully vaccinated and potential gradual opening of entertainment outlets), as both countries’ population have reported commendable fully-vaccinated rates (Malaysia, 75.9%; Singapore 82.7%). Planned reopening of Malaysia’s borders to international tourists coupled with the upliftment of interstate travel could be a major driver for higher sales. We expect 4QFY21 to be much better – recall that during the last pre-pandemic quarter of 4QFY19, CAB achieved a CNP of RM70m. Finally, the absence of the much-speculated increase in excise duties is also seen as a plus.

Post results, we maintain our FY21E CNP but reduced FY22E CNP by 7.5%, reflecting the impact arising from the Prosperity Tax.

Maintain MARKET PERFORM. TP is maintained at RM23.10 on FY22E PER of 27.4x (implying 1SD above 5-year mean) – which we deem to be justifiable underpinned by: (i) its diversified operations in Malaysia & Singapore: - reducing overdependence on one geographic

Source: Kenanga Research - 15 Nov 2021