In  our  recent  discussions  with  new  MD  Hans  Essaadi  and  finance director Mahendran Kapuppial, it is clear that the company will continue to innovate over the next 15 months and possibly roll out new brands as well. GUIN will also beef up its marketing efforts to gain further traction among  the  younger  drinkers.  While  we  still  expect  stable  and  healthy growth  for  the  company,  its  valuations  appear  to  be  fair.  Maintain NEUTRAL, with our FV at RM17.47.

-  New  things  to  come.  We  brought  a  group  of  fund  managers  and  buy-side analysts to meet Guinness Anchor (GUIN)’s MD Hans Essaadi and finance  director  Mahendran  Kapuppial  recently.  We  were  told  that  the company  intends  to  upgrade  its  product  packaging  and  extend  the lines for  its  three  core  brands  of  Guinness,  Heineken  and  Tiger,  and  is  also exploring  the  prospects  of  introducing  a  new  beer  to  the  Malaysian market.  The  lighter,  sweeter  beer  is  meant  to  be  more  accessible  in terms of taste.

-  From  farm  to  point  of  purchase.  Apart  from  the  heavy  investments  in marketing, GUIN is also putting more emphasis on maximizing consumer experience  at  the  point  of  purchase.  Although  the  company  has historically  focused  on  brewing  and  distributing  beer  to  outlets,  it  is  now also  emphasizing  quality  at  the  retail  level  in  order  to  enhance  volume growth and protect its brand equity.

-  Regulatory risks manageable. While the risk of the excise duty for beer being  raised  has  increased  now  that  the  country’s general  election  is over,  we  do  not  expect  a  duty  hike  for  the  brewers  because  the  sector has a role in the health of the tourism industry. Besides, Malaysian beer duties  are  already  the second  highest  in  the  world.  Meanwhile,  dividend yields  have  narrowed  substantially  following  the stock’s  recent  price appreciation, falling to a historic low of just 3.7%.

-  Gearing  up  on  beta.  Now  that  the  election  overhang  is  over,  we  think that investors will turn to the more cyclical sectors, which will reduce the premium  attached  to  strong  and  stable  consumer  companies.  We maintain NEUTRAL on GUIN, with our FV unchanged at MYR17.47.

Source: RHB