GAB (3255) - Guinness Anchor - Strong 2Q bottomline
Target RM12.70 (Stock Rating: HOLD)
GAB’s 1HFY6/15 net profit came in above our (65%) and consensus full-year estimates (66%) due to the lower operating expenses and increase in selling prices. The stronger 1H results were driven by effective marketing activities, new product launches as well as the low base effect in 1QFY14. Given the better-than-expected results, we raise our FY15-17 net profit forecasts which increases our DDM-based target price. We upgrade the stock from Reduce to Hold given the more attractive dividend yield which we believe is sufficient to compensate investors for the industry risks. GAB declared a single interim DPS of 20 sen, in line with our forecast.
1H top and bottomline reported double-digit growth
GAB’s 1HFY15 revenue rose by 10.8% yoy, while net profit increased by 13% yoy. The stronger topline was driven by (i) the stronger sales volume (+6% in 1H yoy) and (ii) increase in selling prices by the low single-digits for its core brands in Dec 14. Management has attributed the stronger sales volume to effective marketing activities, new product launches (Kirin, Ichiban, Smirnoff Ice, Affligem and three Strongbow flavours) and the increased efforts to curb contraband beers. However, we also believe that the volume growth was driven by the low base effect in 1QFY14 when the group was affected by the planned reduction in distributor stocks. The low base effect in 1QFY14 caused 1QFY15 revenue to grow by a strong 20.7% yoy. 1H EBIT margin was slightly higher yoy at 19.2% versus 18.9% in the previous year.
2Q revenue growth was minimal but profit jumped 15% yoy
Vis-à-vis 2QFY14, revenue grew by 4.3% yoy, driven by volume growth and a low single-digit selling price hike in Dec 14. Despite the minimal increase in its topline, net profit grew by 15.2% yoy as the company delayed some A&P investments to the next quarter as the Chinese New Year festival will fall later on 18 Feb this year versus 31 Jan in 2014. Growth in profit was also driven by cost efficiencies, optimisation and improvement in productivity across GAB’s operations. We also believe that the effect of the low raw material prices between the middle and end of 2013 has started to kick in as the company hedges its raw materials 12-18 months in advance. On a qoq basis, the topline increased by 32.5% yoy while the bottomline improved by 39.4%. This was because 2Q sales volumes were collectively boosted by (i) year-end festivals, (ii) pre-budget stocking up and (iii) selling price hike in Dec 14.
Source: CIMB Daybreak - 06 February 2015
Target RM12.70 (Stock Rating: HOLD)
GAB’s 1HFY6/15 net profit came in above our (65%) and consensus full-year estimates (66%) due to the lower operating expenses and increase in selling prices. The stronger 1H results were driven by effective marketing activities, new product launches as well as the low base effect in 1QFY14. Given the better-than-expected results, we raise our FY15-17 net profit forecasts which increases our DDM-based target price. We upgrade the stock from Reduce to Hold given the more attractive dividend yield which we believe is sufficient to compensate investors for the industry risks. GAB declared a single interim DPS of 20 sen, in line with our forecast.
1H top and bottomline reported double-digit growth
GAB’s 1HFY15 revenue rose by 10.8% yoy, while net profit increased by 13% yoy. The stronger topline was driven by (i) the stronger sales volume (+6% in 1H yoy) and (ii) increase in selling prices by the low single-digits for its core brands in Dec 14. Management has attributed the stronger sales volume to effective marketing activities, new product launches (Kirin, Ichiban, Smirnoff Ice, Affligem and three Strongbow flavours) and the increased efforts to curb contraband beers. However, we also believe that the volume growth was driven by the low base effect in 1QFY14 when the group was affected by the planned reduction in distributor stocks. The low base effect in 1QFY14 caused 1QFY15 revenue to grow by a strong 20.7% yoy. 1H EBIT margin was slightly higher yoy at 19.2% versus 18.9% in the previous year.
2Q revenue growth was minimal but profit jumped 15% yoy
Vis-à-vis 2QFY14, revenue grew by 4.3% yoy, driven by volume growth and a low single-digit selling price hike in Dec 14. Despite the minimal increase in its topline, net profit grew by 15.2% yoy as the company delayed some A&P investments to the next quarter as the Chinese New Year festival will fall later on 18 Feb this year versus 31 Jan in 2014. Growth in profit was also driven by cost efficiencies, optimisation and improvement in productivity across GAB’s operations. We also believe that the effect of the low raw material prices between the middle and end of 2013 has started to kick in as the company hedges its raw materials 12-18 months in advance. On a qoq basis, the topline increased by 32.5% yoy while the bottomline improved by 39.4%. This was because 2Q sales volumes were collectively boosted by (i) year-end festivals, (ii) pre-budget stocking up and (iii) selling price hike in Dec 14.
Source: CIMB Daybreak - 06 February 2015
