CARLSBG (2836) – Fundamental Analysis (20 Jun 2016)



Excel – Download the analysis file
Latest Financial – Q1 2016 Financial Report (17 May 2016)
FY16 Q1 Results Highlight:
  • CARLSBG reported an increase of 6.1%yoy in 1Q16 revenue to RM455.7m and an increase of 39.3%yoy in core net profit to RM64.8m.
  • Earnings increase was mainly driven by higher contribution from both the Malaysia and Singapore operations.
    • The group’s Singapore operations saw revenue increase of 24.0%yoy to RM136.0m due to successful marketing efforts for the Chinese New Year festivities. Revenue from its Malaysia operations managed to record a flat RM 337.8m (+0.5%yoy) despite the loss of revenue from the Luen Heng F&B Sdn Bhd (LHFB) divestment.
  • FY15 domestic revenue contracted 9% YoY mainly due to the revenue impact from its Luen Heng divestment. EBIT fell 19% YoY, impacted also by higher raw material costs on the weaker MYR. Its Singapore ops saw EBIT jump 68% YoY on the back of
    • higher FY15 revenue,
    • better cost efficiencies,
    • improved price and product mix,
    • improved contribution from Maybev,
    • positive currency impact – stronger SGD.
Valuation:
  • In my opinion, fair value of CARLSBG range from 14.2 to 15.2. Uncertainty risk of fair value is MEDIUM.
CARLSBG-FY16Q1-Football-Field
Going Forward:
  • 3 Mar 2016 – The government has gazette into law some changes to the methodology in which excise duty (ED) on beers and liquor is calculated. Previously the ED on beers was calculated as RM7.40/litre + 15% ad valorem tax. Effective 1/3/2016 the duty is calculated on basis of RM175 per 100% vol/litre.
    • 3 Mar 2016 – Brewery – A Relieving Excise Duty Revision
  • Despite the excise hike in March, I think CARLSBG would be less affected due to its growing contribution from its Singapore operations.
  • Earnings should be sustainable at current levels. On the other hand, the better product mix with more investment and brand building on the premium brands, including Somersby Apple Cider, Somersby Pear Cider and Kronenbourg is expected to drive earnings growth as sales volume growth is expected to be subdued due to the soft consumer sentiment.
  • The exposure in Singapore has grown to 37.6% from 24.0% a year ago which is positive as it provides a market for the Group to diversify away from the local market which is dogged by persistently weak consumer sentiment and contrabands beers.
  • The Group’s effective cost management programmes, which had helped to reduce the impact of MYR depreciation on the operating costs.
At the time of writing, I owned shares of CARLSBG.