AmWatch - Guinness Anchor : 9MFY15 meets expectations BUY

STOCK FOCUS OF THE DAY

Guinness Anchor : 9MFY15 meets expectations                 BUY

We maintain BUY on Guinness Anchor Bhd (GAB) with a higher DCF-derived fair value of RM16.00/share as we roll forward our valuation base to FY16F. Our fair value implies FY15F-FY16F PEs of 21x-22x. GAB reported a net profit of RM39mil for 3QFY15, to bring its 9MFY15 earnings to RM170mil. We deem the results to be in line, as it met 77% of our, and 78% of consensus forecasts.

Compared to 9MFY14, GAB’s 9MFY15 earnings was higher by 12.5% on the back of a similar 12.8% rise in revenue. This improvement stemmed from increases in both prices and volumes. The better performance can also be attributed to its more favourable brand mix, which helped to support margins (flattish YoY despite a 13% hike in opex). The introduction of Smirnoff Ice RTD, Affligem and new Strongbow variants thus far in FY15 is in line with the group’s focus on innovation and premiumisation drive.

Sequentially, GAB’s revenue and earnings were lower by 16% and 48%, respectively, despite a full quarter of price increase and the CNY festivity. We believe this was partly due to the higher base in 2QFY15, when distributors and retailers stocked up in anticipation of a surge in demand in 3QFY15 from pre-GST loading activities when demand is the highest (i.e. CNY). Additionally, its higher sales mix consisting mainly of cans and increased brand activation activities in 3QFY15 had contributed to the declines and 7ppts margin compression. During its analysts’ briefing, management said that the impact of the GST would depend on the distribution channel. It expects the modern on-trade segment to be unaffected as the GST would merely replace the existing 6% SST while the off-trade and some traditional on-trade segments will see a retail price increase. No dividends were declared this quarter.

Others :

Malakoff Corporation : Leading IPP on a growth path      IPO

Tan Chong Motor : Missed street estimates yet again, but registering improvements                      HOLD

Timber Sector : Industry overhaul in Sarawak      NEUTRAL

Plantation Sector : Slower output growth             OVERWEIGHT

QUICK TAKES

Parkson Holdings : Significant SSSG improvement for Malaysia   BUY

Kimlun Corporation : Buys Kota Tinggi land for RM28mil                 HOLD

NEWS HIGHLIGHTS

Malaysia Building Society : MBSB has no toxic loans says CEO

Construction Sector : Indonesia’s Mulia Group to develop TRX’s Signature Tower

DISCLAIMER:

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.