Slowdown won't hurt Guinness: OSK

In the event of a slowdown in the domestic economy or in the worst-case, a recession, Guinness Anchor Bhd (GAB) will not feel the pinch, says OSK Research.

In a research note today, OSK Research said GAB could potentially benefit from falling material prices.

"Drinkers are likely to downgrade from more expensive alcoholic beverages such as whisky and vodka to cheaper ones.

"Excluding traditional alcoholic drinks like tuak and rice wine, beer is arguably the cheapest alcoholic beverage and hence, we believe its consumption contraction is likely to be minimal, if any," it added.

The research house said there is huge potential for GAB to increase sales in Sabah and Sarawak, given that geographically, sales in the region surged 20 per cent year-on-year, due to stricter government enforcement on smuggled beer sales, which initially made up some 80 per cent of the market.

"Given the clampdown on beer smuggling, we believe there is huge potential for GAB to increase sales in Sabah and Sarawak," it added.

Meanwhile, OSK Research maintained the "buy" call on GAB with no changes in its earning's forecast, which implies a 13.9 per cent earnings growth for financial year 2012 and 7.7 per cent for the following financial year.

For its financial year ended June 2011, GAB recorded a 18.5 per cent increase in pre-tax profit to RM242.88 million compared to RM204.99 million last year.

Its revenue also grew by 10 per cent to RM1.49 billion from RM1.36 billion while net profit increased 19 per cent to RM181.4 million from RM152.7 million previously. -- Bernama