Company Name: CARLSBERG BREWERY MALAYSIA BHD
Research House: RHB
Carlsberg Brewery Malaysia Bhd
(Aug 19, RM5.27)
Maintain buy at RM5.20 with revised target price RM5.80 (from RM5.30): Although 1HFY2010 revenue made up 51% of our full-year (FY) forecast (against 1H2009 at 48%), net profit grew even faster than expected in 1H to drown our estimates. It accounted for 59% (against 1H2009 at 45%) of our FY forecast. Year-to-date (YTD) revenue grew 42% while net profit surged by 100%. The higher than expected bottom line growth was mainly due to better operating efficiency, with 1HFY2010 Ebitda margins coming in at 13.74% against our previous conservative estimate of 12.8%.
In view of Calsberg's better than expected efficiency, we now lower our operating cost assumptions to match its YTD performance. Our earnings before interest, tax, depreciation and amortisation (Ebitda) margin is now revised higher to 13.8% from 12.8% (1HFY2010 Ebitda ' 13.7%) previously upon lowering our advertising and promotion expenses. This prompts us to lift our bottom line earnings estimates by 14% to 15% for FY2010. Carlsberg has declared an interim gross dividend of five sen per share for 2QFY2010. However, it also dropped a pleasant surprise by declaring an additional 2.5 sen special dividend.
The higher than expected dividend leads us to revise upwards our FY dividend estimates to 27.5 sen from 25 sen previously. At its current share price, this will translate into a gross yield of 5.3%.
Our higher earnings estimates lead us to revise higher our target price from RM5.30 to RM5.80, and ascribe a lower weighted average cost of capital of 9.8% against 10.7% previously. Backed by a stock upside of 11.5% coupled with a gross dividend yield of 5.3%, we maintain our 'buy' recommendation. ' RHB Research, Aug 19
This article appeared in The Edge Financial Daily, August 20, 2010.