KUALA LUMPUR (March 10): Guinness Anchor Bhd's (GAB) "solid" financial profile will allow the beer manufactucurer to weather potential short-term impact from Malaysia's excise tax hike, RAM Rating Services Bhd said.

In a statement today, RAM said the tax hike is expected to result in a modest drop in malt liquor consumption volume.

"After the last tax hike (+23.3%) 10 years ago, malt liquor market volumes fell for 2 years, before recovering, as consumers adjusted to the new prices. Similarly, we expect the domestic malt liquor market volume to ease, but to a much lesser extent and for a shorter time period, given the lower quantum of the tax increase. RAM expects a decline of 1%-3% in FY 2016, before recovering thereafter.

"Meanwhile, GAB’s balance sheet remained conservative as at end-December 2015, with its gearing ratio clocking in at 0.32 times. At the same time, the Group’s cashflow-protection metrics stayed superior, with funds from operations debt coverage of 3.80 times," RAM said.

According to RAM's statement, Malaysia's revised liquor excise duty is now based on the percentage of alcohol in the beverage. Under the system, the government charges RM175 per litre of 100% alcohol.

Previously, the government based the tax structure on volume. Under the system, the government imposed RM7.40 per litre, plus a 15% ad valorem tax.

"Effectively, the new tax regime translates into RM8.75 per litre or roughly a 10% spike in tax on mainstream beers, assuming beer has an average alcohol content of 5%," RAM said.

RAM said GAB's RM500 million bond was rated AAA/Stable/P1. The bond, issued in 2011, matures in 2018.

At 4:04pm today, GAB shares fell six sen or 0.4% to RM14.66, for a market capitalisation of RM4.43 billion. The stock saw 80,400 shares traded.