Stock Name: GAB
Company Name: GUINNESS ANCHOR BHD
Research House: MAYBANK
Guinness Anchor Bhd
(Feb 21, RM9.50)
Upgrade to Buy at RM9.35 with target price RM10.60: Post analyst briefing for 1HFY11 results, we have tweaked our FY11/13 net profit forecasts, but compound annual growth rate (CAGR) remains little changed at 11%. GAB continues to grow market share while domestic economic conditions remain conducive for industry demand growth. The recent correction in its share price provides an opportunity to accumulate. We retain our RM10.60 discounted cash flow-based target price, and investors could also expect decent gross dividend yields of 5% to 5.5%.
GAB's market share in Malaysia continued to grow, reaching 59% in 1HFY11 (FY10: 57%). We believe GAB will at least sustain its market share. We expect the domestic malt liquor market to grow 4% this year to surpass its peak of 1,513 hectoliters in 1998, based on our estimated GDP growth of 5.5% for 2011. GAB's management expect the malt liquor market to grow 4%-5% this year, mirroring the movement of GDP growth.
GAB went from organising four parties in 2006 to 700 in 2010. Despite millions of ringgit spent on brand building over the years, we positively view the earnings before interest and tax compound annual growth rate of 9.8% from FY06 to FY10 compared with its distribution, selling and marketing expenses CAGR of -10.4% over the same period. Advertising and promotion remains vital for GAB; we expect the company to retain its spending of RM146 million in FY10.
Details on the costs write-back of RM15 million, we estimate, based on normalised margins, which contributed to the strong 2QFY11 performance (net profit +48% year-on-year, +67% quarter-on-quarter) were not disclosed but would be one-off, according to management. The actual amount of cost write-back was also not disclosed. ' Maybank IB Research, Feb 21
This article appeared in The Edge Financial Daily, February 22, 2011.
Company Name: GUINNESS ANCHOR BHD
Research House: MAYBANK
Guinness Anchor Bhd
(Feb 21, RM9.50)
Upgrade to Buy at RM9.35 with target price RM10.60: Post analyst briefing for 1HFY11 results, we have tweaked our FY11/13 net profit forecasts, but compound annual growth rate (CAGR) remains little changed at 11%. GAB continues to grow market share while domestic economic conditions remain conducive for industry demand growth. The recent correction in its share price provides an opportunity to accumulate. We retain our RM10.60 discounted cash flow-based target price, and investors could also expect decent gross dividend yields of 5% to 5.5%.
GAB's market share in Malaysia continued to grow, reaching 59% in 1HFY11 (FY10: 57%). We believe GAB will at least sustain its market share. We expect the domestic malt liquor market to grow 4% this year to surpass its peak of 1,513 hectoliters in 1998, based on our estimated GDP growth of 5.5% for 2011. GAB's management expect the malt liquor market to grow 4%-5% this year, mirroring the movement of GDP growth.
GAB went from organising four parties in 2006 to 700 in 2010. Despite millions of ringgit spent on brand building over the years, we positively view the earnings before interest and tax compound annual growth rate of 9.8% from FY06 to FY10 compared with its distribution, selling and marketing expenses CAGR of -10.4% over the same period. Advertising and promotion remains vital for GAB; we expect the company to retain its spending of RM146 million in FY10.
Details on the costs write-back of RM15 million, we estimate, based on normalised margins, which contributed to the strong 2QFY11 performance (net profit +48% year-on-year, +67% quarter-on-quarter) were not disclosed but would be one-off, according to management. The actual amount of cost write-back was also not disclosed. ' Maybank IB Research, Feb 21
This article appeared in The Edge Financial Daily, February 22, 2011.
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