Stock Name: GAB
Company Name: GUINNESS ANCHOR BHD
Research House: MAYBANK
Guinness Anchor Bhd
(Aug 10, RM8.24)
Maintain hold at RM8.21 with target price of RM8.40: Post Guinness' analyst briefing for its FY10 results, we have reviewed our assumptions and marginally lowered earnings forecasts for FY11-FY13 by 2% to 3%.
We still see value in Guinness for its strong operational fundamentals and dividends. The only major downside risk to its growth would be a likely excise duty hike this October. Maintain hold with an unchanged target price.
We trimmed our earnings forecasts by 2% to 3% as 4QFY10 operating costs came in higher than expected. Operating costs could escalate in FY11, mainly from salaries due to staff headcount expansion and more active advertising and promotion.
On the business spectrum, management advised that the margin for on-trade sales is three times higher than off-trade. With more than 70% of Guinness' revenue generated from the more profitable segment, we see this as a positive sign for future earnings growth.
In the absence of any excise duty hike of more than 4% to 5%, we believe Guinness is capable of achieving a three-year earnings compound annual growth rate (CAGR) of 5% to 6%, given its 10-year historical EPS CAGR of 10%.
With the four sen increase in net dividend per share (DPS) for FY10, we expect Guinness to continue raising its DPS.
We forecast an increase of two to three sen per annum for FY11-FY13, representing a net profit payout of 82% to 90%, in line with recent trends of 80% to 90% payout.
Management believes that the probability of an excise duty hike in the upcoming Budget is relatively low. However, we opine that there may be a small excise duty hike of about 4% to 5% as there are larger aspects to consider, such as the level of indirect taxes as well as religious sensitivities.
With a healthy balance sheet on the back of a growing earnings base, we think that the only major downside is the possible excise duty hike. Maintain hold with RM8.40 discounted cash flow-based target price. ' Maybank IB Research, Aug 10
This article appeared in The Edge Financial Daily, August 11, 2010.
Company Name: GUINNESS ANCHOR BHD
Research House: MAYBANK
Guinness Anchor Bhd
(Aug 10, RM8.24)
Maintain hold at RM8.21 with target price of RM8.40: Post Guinness' analyst briefing for its FY10 results, we have reviewed our assumptions and marginally lowered earnings forecasts for FY11-FY13 by 2% to 3%.
We still see value in Guinness for its strong operational fundamentals and dividends. The only major downside risk to its growth would be a likely excise duty hike this October. Maintain hold with an unchanged target price.
We trimmed our earnings forecasts by 2% to 3% as 4QFY10 operating costs came in higher than expected. Operating costs could escalate in FY11, mainly from salaries due to staff headcount expansion and more active advertising and promotion.
On the business spectrum, management advised that the margin for on-trade sales is three times higher than off-trade. With more than 70% of Guinness' revenue generated from the more profitable segment, we see this as a positive sign for future earnings growth.
In the absence of any excise duty hike of more than 4% to 5%, we believe Guinness is capable of achieving a three-year earnings compound annual growth rate (CAGR) of 5% to 6%, given its 10-year historical EPS CAGR of 10%.
With the four sen increase in net dividend per share (DPS) for FY10, we expect Guinness to continue raising its DPS.
We forecast an increase of two to three sen per annum for FY11-FY13, representing a net profit payout of 82% to 90%, in line with recent trends of 80% to 90% payout.
Management believes that the probability of an excise duty hike in the upcoming Budget is relatively low. However, we opine that there may be a small excise duty hike of about 4% to 5% as there are larger aspects to consider, such as the level of indirect taxes as well as religious sensitivities.
With a healthy balance sheet on the back of a growing earnings base, we think that the only major downside is the possible excise duty hike. Maintain hold with RM8.40 discounted cash flow-based target price. ' Maybank IB Research, Aug 10
This article appeared in The Edge Financial Daily, August 11, 2010.
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