Guinness’  MYR217.6m  FY13  net  profit  (+4.9%  y-o-y)  came  within expectations.  A  final  dividend  of  MYR0.49  per  share  was  declared, bringing  FY13  payout  to  MYR0.69.  All  in,  we  maintain  our  forecasts, with  FV  staying  at  MYR20.46,  based  on  FCFF  valuation  (WACC:  6.8%, TG: 2.5%). We are still NEUTRAL on the stock, given its higher dividend yields of 4% when compared against the 2% average of its global peers.

- Within expectations. Guinness’ FY13 net profit of MYR217.6m (+4.9% y-o-y)  was  largely  in  line  with expectations, making up  96%  of  both  our and  consensus  estimates.  During  the  year,  revenue  increased  at  a slower pace (+3% y-o-y), which we believe is due to flat volume growth. That  said,  a  mainstream-premium  brand  beers  substitution  effect persists  and,  coupled  with  cost  optimisation  efforts,  has  helped  to improve its overall profitability margins in FY13.  Guinness also declared a  final  dividend  of  MYR0.49  per  share,  bringing  its  full-year  payout  to MYR0.69 per share (FY12: MYR1.25 per share).  

- Outlook. Going forward, we expect Guinness to see improving average selling  prices  (ASP)  and  widening  margins  on  the  back  of  robust premium  beer  sales.  As  for  an  excise  duty  hike,  we  do  not  foresee  an increase,  as  the  sector  plays  a  part  in  boosting  Malaysia’s  tourism industry. Additionally, next year is Visit Malaysia 2014. Furthermore, the country’s brewers are being charged the second-highest duty rate in the world behind Norway.

- Forecast.  Our  forecasts  remain  unchanged  as  our  positive  outlook  for Guinness remains intact.

- Risks. Our forecast on Guinness can be negatively impacted by factors like: i) a slowdown in sales volume, and ii) an excise duty hike.

- Investment  merit.  We  continue  to  value  Guinness,  based  on  FCFF valuation,  at  a  FV  of  MYR20.46  (WACC:  6.8%,  TG:  2.5%)  with  an implied  FY14F  P/E  of  25.0x.  This  represents  a  20%  premium  when compared against global peers, justifiable by its higher dividend yields of 4% vs the 2% average of its peers. Furthermore, it has a strong balance sheet coupled with robust operating cash flow generation.

Source: RHB