Guinness Anchor (RM8.24; Not Rated; GUIN MK)

4QFY10 results review: 4QFY10 net profit surged 30.2% yo-
y to RM35.7m as revenue rose 11.7% y-o-y to
RM308.7m. This was boosted mainly by higher sales volume
driven by commercial activities in conjunction with the 2010
FIFA World Cup season. Meanwhile, operating margin
added 1.7ppt to 15.5% in 4QFY10 (vs 4QFY09: 13.8%),
attributed to higher on-trade sales – GAB’s on-trade sales
made up c.70% of total sales – which are more profitable,
given improved economies of scale.
For full-year FY10, net profit totalled RM152.7m (+7.5% yo-
y) while revenue increased 5.7% y-o-y to RM1.4b.
Operating margin inched up 0.3ppt to c.15% from 14.7%
in FY09. Guinness Anchor Bhd (GAB) is believed to have
gained more market share from its rivals on the backdrop of
a relatively stable industry volume estimated at c.1.50m HL
(hectolitre) in FY10 vs 1.45m HL in FY09. As of end-Mar10,
GAB had an estimated overall market share of 57.2%
(+0.1ppt from end-Jun09’s 57.1%).
FY11’s outlook: Going into FY11, GAB expects sales volume
to grow moderately and is optimistic that it would continue
to gain market share. It is of the view that the Malaysia
government would maintain excise tax at current levels
given its high excise tax rate compared to other countries
globally. Meanwhile, raw material cost should be relatively
stable compared to 2008-2009 as GAB has hedged raw
material required until Dec 2010 (or 1HFY11). GAB is
looking to increase overhead cost (by double-digit) and A&P
expenses (by single-digit) in FY11 to strengthen its
management and operation teams and continue to build
brand awareness. These are not expected to impact margins
as higher A&P expenses are expected to be compensated by
higher sales. In terms of capex, GAB has budgeted RM50m
in FY11 vs RM40m in FY10m. This would be spent mainly
on annual maintenance and machineries.
GAB declared a final tax exempt DPS of 35 sen, bringing full
year DPS to 45 sen (vs FY09’s 41 sen). This implies a yield of
5.5% for FY10. GAB currently trades at a CY11 PE of 14.9x
(vs Carlsberg’s CY11 PE of 12.2x). Based on consensus
estimates, GAB is expected to pay 47.9 sen DPS in FY11.
This translates into 5.8% yield.