Stock Name: GAB
Company Name: GUINNESS ANCHOR BHD
Research House: AMMB
Brewery sector
Maintain overweight: Carlsberg Brewery Malaysia Bhd and Guinness Anchor Bhd have announced a price increase of about 3% across all its products by early May 2010.
The management cited higher raw ingredient costs particularly costs of barley, hops and aluminium, which have been hovering at high levels. In the past, brewery players had implemented two to three price increases - over 2008 and 2009 - to maintain margins. We are neutral on this development, as we eckon higher prices are unlikely to have any significant impact on consumption. Raw materials typically constitute circa 13% of group revenue of Carlsberg and Guinness, respectively.
Furthermore, we expect a boost to consumption levels on back of special world events such as the World Cup 2010 from June 11 and Commonwealth Games 2010 from Oct 3.
Moving forward, we maintain our forecast of 2% growth for the malt-liquor market in the financial year ending 2010 (Dec 31 for Carlsberg, June 30 for Guinness) versus growth in FY09 of 0.5%.
With status quo of excise duty at RM7.40/litre for this year, both players are hopeful of seeing 2% to 3% industry growth. We expect healthy competition between the two players with more product launches in the coming few months leading to the World Cup event.
As it is, Guinness launched its limited edition "Tiger Crystal" beer early April 2010, aimed exclusively at pubs and eateries. Tiger Crystal is filtered at the crystal cold temperature of 1° Celsius to preserve its flavour. Our preliminary checks revealed positive feedback, with most outlets in the Klang Valley reporting good sales.
We maintain our overweight stance on the malt liquor sector for dividend play with yields of 6%-7%. Compared to other defensive alternative such as the tobacco sector, which yields similar dividend yield, the malt liquor sector offers a better proposition in view of the encouraging overall business operating environment.
We maintain our buy recommendation on Guinness with an unchanged discounted cash flow-based (DCF) fair value of RM7.60 per share (discount: 10%, due to its dominant 56% market leadership). We also maintain a buy on Carlsberg, but its fair value is under review pending its first-quarter FY10 results. - AmResearch, April 28
This article appeared in The Edge Financial Daily, April 29, 2010.
Company Name: GUINNESS ANCHOR BHD
Research House: AMMB
Brewery sector
Maintain overweight: Carlsberg Brewery Malaysia Bhd and Guinness Anchor Bhd have announced a price increase of about 3% across all its products by early May 2010.
The management cited higher raw ingredient costs particularly costs of barley, hops and aluminium, which have been hovering at high levels. In the past, brewery players had implemented two to three price increases - over 2008 and 2009 - to maintain margins. We are neutral on this development, as we eckon higher prices are unlikely to have any significant impact on consumption. Raw materials typically constitute circa 13% of group revenue of Carlsberg and Guinness, respectively.
Furthermore, we expect a boost to consumption levels on back of special world events such as the World Cup 2010 from June 11 and Commonwealth Games 2010 from Oct 3.
Moving forward, we maintain our forecast of 2% growth for the malt-liquor market in the financial year ending 2010 (Dec 31 for Carlsberg, June 30 for Guinness) versus growth in FY09 of 0.5%.
With status quo of excise duty at RM7.40/litre for this year, both players are hopeful of seeing 2% to 3% industry growth. We expect healthy competition between the two players with more product launches in the coming few months leading to the World Cup event.
As it is, Guinness launched its limited edition "Tiger Crystal" beer early April 2010, aimed exclusively at pubs and eateries. Tiger Crystal is filtered at the crystal cold temperature of 1° Celsius to preserve its flavour. Our preliminary checks revealed positive feedback, with most outlets in the Klang Valley reporting good sales.
We maintain our overweight stance on the malt liquor sector for dividend play with yields of 6%-7%. Compared to other defensive alternative such as the tobacco sector, which yields similar dividend yield, the malt liquor sector offers a better proposition in view of the encouraging overall business operating environment.
We maintain our buy recommendation on Guinness with an unchanged discounted cash flow-based (DCF) fair value of RM7.60 per share (discount: 10%, due to its dominant 56% market leadership). We also maintain a buy on Carlsberg, but its fair value is under review pending its first-quarter FY10 results. - AmResearch, April 28
This article appeared in The Edge Financial Daily, April 29, 2010.
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