Hot Stock GAB falls 1% after weak 1Q results

by **Cals** Mon 11 Nov 2013, 14:19

Hot Stock GAB falls 1% after weak 1Q results

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Monday, 11 November 2013 12:36

KUALA LUMPUR (Nov 11): Guinness Anchor Bhd (GAB) saw its share price fall 1% as planned reduction in distributor stocks and weaker consumer spending worsened its 1Q results.

Net profit of GAB’s first quarter ended Sept 30 declined to RM49.6 million, from RM56.8 million in similar quarter a year ago, on reduced revenue.

At 12.12 pm today, the brewer fell 16 sen or 0.9% to RM17.12 on trades of 34,000 shares. It was the fifth top loser.

In a note, CIMB Investment Bank Research said it has downgraded GAB’s target price (TP) to RM17.50 from RM18.40 earlier.

“This is in line with our FY14-16 net profit forecasts, where we cut by 4-8% after lowering our sales volume expectations by 7%,” said Terence Wong, CIMB IB head of research.

“Although its valuation is unattractive, its 4%-4.5% dividend yield will lend support to its share price. Having said that, we maintain our ‘neutral’ call on GAB.”

Wong said he believes that the poor results were also due to the less aggressive advertising and promotion activities in 1Q FY14.

He said the earlier pre-Budget stockpiling by retailers in 1Q FY13 was also a factor.

“But we expect sales volume to pick in 2Q FY14, driven by retailers’ pre-Budget stockpiling in October and the year-end festive season,” said Wong.

Wong opined that competition would remain intense going forward as Carlsberg Brewery Malaysia Bhd has also been investing heavily in A&P in recent months.

To remain competitive, he said GAB would continue to invest in brand line extension.

Meanwhile, Kenanga Research said it remains cautious on GAB’s outlook and prospects as consumer spending could be further dampened by the government’s plans to rationalise subsidies, including GST implementation.

“We maintain ‘underperform’ rating for GAB with unchanged TP of RM16.52,” said Kenanga research analyst Lawrence Yeo Eng Chien.