Guinness Anchor Bhd
(Feb 6, RM12.98)
Upgrade to buy with a target price of RM13.80. Guinness Anchor Bhd’s (GAB) first half financial year 2015 (1HFY15) core net profit of RM130.7 million, up 13% year-on-year (y-o-y) was above expectations. This makes up for 66% and 64% of our and consensus original full-year forecasts.

The 1HFY15 y-o-y revenue growth of 11% was mainly driven by volume growth, favourable pricing and brand mix, and Royal Malaysian Customs department’s proactive action against contrabands.

The management attributed the volume growth mainly to Tiger, one of GAB’s core brands, industry recovery post-air disasters last year and partly to market share gain. The 1HFY15 pre-tax profit grew at a healthy pace of 13% y-o-y due to the above-mentioned reasons, partly offset by higher excise duty and sales tax payments between July and Oct 2014.

Second-quarter (2Q) pre-tax profit rose 15% y-o-y on lower advertising and promotions expense and improved cost efficiencies.

We expect 3QFY15 earnings to be supported by festive sales and pre-goods and services tax (GST) stocking activities. The 4QFY15, while seasonally slower, could see sales further impacted by weak post-GST demand.

Overall, however, we raise our earnings forecast by 5% to 6% for FY15 to FY17 on an improved industry outlook, factoring in higher growth in malt liquor market volume for FY15 to FY17 and assuming a 0.5-percentage-point market share gain for GAB.— Maybank Investment Bank Bhd, Feb 6

This article first appeared in The Edge Financial Daily, on February 9, 2015.