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Guinness Anchor Bhd
(Nov 17, RM13.16)
Maintain “hold” with an unchanged target price of RM13.20:
Guinness Anchor (GAB)’s first quarter/six month financial year 2015 (1QFY6/15) core net profit of RM54.6 million (+10% year-on-year [y-o-y], +16% quarter-on-quarter [q-o-q]) was within expectations. This makes up for 27% of our and consensus full-year forecasts. Its 1QFY6/15 y-o-y revenue growth of 21% was mainly due to: i) higher sales and pricing; ii) improved brand mix; and iii) positive impact from the government’s increased measures against contrabands.

However, its q-o-q revenue was down 5% due to seasonal factors. GAB’s 1QFY6/15 earnings before interest and tax (ebit) grew at a slower pace of 10% y-o-y due to higher excise duty and sales tax payments and higher advertising and promotions (A&P). To recap, the former was due to the change in valuation method for excise duty effective Nov 1, 2013. The 1QFY15 ebit, nevertheless, rose 13% q-o-q, due to lower production costs and higher A&P in the preceding quarter.

The Malaysian Institute of Economic Research’s consumer sentiment index has rebounded somewhat in April to June 2014 but weakened again to sub-100 in July to September 2014. Coupled with ongoing rationalisation of government subsidies and goods and services tax (GST) from April 2015, consumer demand could remain subdued in the coming months. Moving forward, its 2QFY15 and 3QFY15 earnings could be fair as we expect: i) pre-stocking activities pre-GST; and ii) festive sales.

Valuation-wise, the stock is fairly valued now in our view, trading at an FY15 price-earnings ratio of 20 times. We keep our earnings forecast, recommendation and call. Dividend yield of approximately 5% provides support. — Maybank Research, Nov 17

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This article first appeared in The Edge Financial Daily, on November 18, 2014.

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