Guinness Anchor Bhd (BUY; NEW)

Cheers!!

• Guinness Anchor Bhd is the market leader in the brewery sector, where it’s sales revenue are mainly contributed by Tiger, Guinness, Heineken and Anchor. Also, GAB’s volume has been growing at a faster pace compared to the overall malt liquor market (MLM) with 12-years CAGR of 2.76% vs. 1.73% by the latter.
• The bases on our investment highlights for GAB includes:

1. Dividend yield play - plans in reviewing its current dividend payout policy. GAB currently has an unofficial 90% dividend payout;
2. Optimizing capital structure – increasing debt through issuance of Commercial Papers/Medium-Term Notes (CP/MTN) of up to RM500m, implying more special dividends ahead;
3. Re-packaging Heineken and upgrading its SAP system, an IT front-end system; and

• We are assuming industry volume to grow at 4.0% and GAB’s market share to remain stable at 57%. As for EPS, we expect FY12-FY14 EPS to grow at 6-12% annually.
• Initiating with a BUY recommendation and TP of RM14.66 based on DCF valuation with WACC of 7.6%

Source: Hong Leong Investment Bank Research - 4 July 2012