FY21 CNP came in within both our and the street’s expectations given the challenging operating environment. Post results, we reduced FY22E CNP to RM256.2m, reflecting the impact arising from elevated input costs which could be offset partially by higher demand for alcoholic beverages. We also introduced our FY23E earnings. We maintain our MARKET PERFORM call but with a TP of RM23.10.

Within expectations. Despite FY21 CNP coming in at RM201.0m, making up 100% of our expectation and 97% of the street’s expectation, we deem this to be justifiable given the circumstances and the environment that the group was operating in.

Understandable result. YoY. Despite the challenging environment, CARLSBG managed to navigate the uncertainties by reporting a flattish revenue of RM1.8b citing lower sales due to the suspension of its brewery operations coupled with dine-in restrictions in the domestic and foreign markets. Geographical-wise, the Singaporean operations contributed revenue of RM561.1m (+6.3%) whereas contribution from the Malaysian operations contracted to RM1,211.8m (-4.1%). However, PBT and CNP increased to RM259.5m (+23.7%) and RM196.5m (+21.9%), respectively, attributable to the more prudent stance taken by the group (such as discount optimization).

QoQ, 4QFY21 sales came in at RM542.3m (+55.3%), boosted by increased demand for alcoholic beverages in conjunction with the holiday and festive seasons – resulting in CNP surging 149.4% to RM67.2m. The group is deemed to have strengthened its financial position as reflected by its EBIT margins which expanded to 16.1% from 8.7%.

Dividend. The group declared a DPS of 46.0 sen for the period under review taking its FY21 dividends to 56.0 sen (vs. 40.0 sen in FY20)

Short-term view. With the prices of commodities such as aluminum and barley rising 40% and 61%, respectively, in FY21, the group is expected to face slight margin compression moving forward.

Long-term outlook. We believe the downside risk mentioned above could be mitigated by the group’s SAIL’22 strategy which focuses on innovation (by creating newer product offerings) and premiumization of key products to target selected demographics. In addition, the group has allocated RM110m as capex to further enhance and streamline its business operations. The group is further expected to report increased revenue contribution via its e-Commerce platforms. On these grounds, we expect CARLSBG to have a slightly better outlook moving forward.

Post results, we reduced FY22E CNP to RM256.2m (-0.5%), reflecting the impact arising from elevated input costs which could be partially offset by higher demand for alcoholic beverages. We also introduced our FY23 earnings.

We maintain our MARKET PERFORM call with a TP of RM23.10 based on FY22E PER of 27.5x (slightly below to its 5-year mean of 29.2x) which is justifiable as we factor elevated input cost & crimping earnings. In addition, CARLSBG commands a higher PER due to its exposure to the Singapore markets.

Risks to our call include renewed lockdowns, lower volume of sales and increased sales of illicit beverages

Source: Kenanga Research - 18 Feb 2022