Affin Daily Insight (LV) - 10 April 2014 - BREWERY / DMR

Top Calls

Sector Update � Brewery (NEUTRAL, maintain) - Drinking slow and steadily Share prices for the brewers rallied in 2013 that have led to lofty valuations, while their yields were compressed to 4%. Coupled with investor concerns of an overall slowdown in consumer spending, and typically on consumer discretionary products following the government�s subsidy rationalization program, the share prices for GAB and CAB severely underperformed the market over the past year. We see the sharp correction in share prices providing an attractive entry point, with valuations and yields becoming more appealing now. We also like the brewers� strong fundamentals, good branding and corporate governance. Between the two brewers, we prefer GAB due to its stronger foothold both in the off-trade channel and traditional on-trade channels. Importantly, we believe some social drinkers may �down-trade� to more affordable neighbourhood pubs in view of the rising cost of living environment. In terms of volume, we expect beer-sales volume to stay depressed going forward, despite the sector, once again, being spared from an excise duty hike in Budget 2014. While some may argue that the major sporting event, FIFA World Cup 2014, will likely boost the country�s alcohol consumption, we however believe that this is unlikely to happen given the likely unfavourable airing time of live football matches locally.

Other Calls

Debt Market Research - Sustained flattering on high volumes

Morning News & Market Summary

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