Carlsberg Brewery Malaysia Bhd
SHARES for Carlsberg Brewery Malaysia (Fundamental: 2.3/3, Valuation: 2.1/3) have done quite well since we first highlighted the stock on February 26, when it was at RM12.50. It went on to close at a high of RM14.48 on April 15 before giving back part of the gains in line with the broad market weakness. We continue to like Carlsberg for its steady earnings and above-market average yields.

To recap, the company is one of two manufacturers of beer and stout in the country. Back in 2009, the company acquired the Carlsberg franchise in Singapore. Its key brands include Carlsberg, Asahi, Kronenbourg, SKOL, Jolly Shandy and Somersby.

Outlook for the current year is challenging, to say the least. Implementation of the GST will eat into consumer disposable incomes while rising duties and contrabands remain a threat.

Nevertheless, Carlsberg has a pretty good track record for steady sales and profit growth, thanks to its strong brands, continuous introduction of new products and focus on improving operating efficiency and reducing costs. In recent years, it has focused on growing its range of premium brands, including imports and subsequently to locally produce these products.

Between 2010 and 2014, revenue increased from RM1.37 billion to RM1.64 billion, while net profit rose from RM133.2 million to RM211.6 million. EBITDA and net margins have been stable, averaging around 16% and 12%, respectively, over this period.

Save for the year it acquired Carlsberg Singapore, the company has maintained a high dividend payout, averaging at 99% in the past five years. For 2014, dividends totaled 71 sen per share, which translates to a yield of 5.5% at the prevailing price of RM12.92.

The stock is currently trading at a trailing 12-month P/E of 18.78 times with a yield of 5.5%, compared to Guinness Anchor’s trailing 12-month P/E of 20.29 times and yield of 4.4%.

This article first appeared in The Edge Financial Daily, on May 25, 2015.