Friday 4 November 2011

GAB eats into rival’s market share

KUALA LUMPUR: Guinness Anchor Bhd (GAB) could have overtaken Carlsberg Brewery Malaysia Bhd with its product, Tiger beer, eating into its competitors’ market share.

“The current market share for Tiger is in the mid-30s [percentage]. I can tell you that Tiger, for the last four years, has been growing more rapidly than the overall market, and therefore increasing its market share,” GAB managing director Charles Ireland said at a press conference yesterday after the brewery’s 47th AGM.

GAB’s other beers with strong performances include its Guinness and Heineken brands.

The group chalked up a nearly 43% growth in net profit to RM55.2 million for 1QFY11 ended Sept 30 from RM38.7 million in the previous corresponding period.

Ireland attributed the growth to various reasons including “excellent brand performers, a really nice mix of products and solid cost control”. He did, however, admitted his group’s gain over GAB’s competitor. “[The growth was] partially at the expense of our competitor. It was a mix of different reasons. We took additional market share,” he said.

Additionally, he said GAB’s change in sales also contributed to the success. “We reduced export duty free volumes this quarter and we saw tremendous [overall] growth, and really good growth in Heineken and Guinness... those brands are good for our mix.”

Ireland says speculative purchases ahead of Budget 2012 led to the sales growth.


Other reasons for the year-on-year growth include Budget 2012 being unveiled earlier than Budget 2011 a year ago. Ireland said speculative purchases ahead of the budget (due to fears of higher taxes) were seen more in first quarter sales than in the second quarter.

While Budget 2012 did not include any hike in sin taxes, Ireland said the group would not be “breathing a big sigh of relief and just thinking that is the end of the conversation for another year”. He said taxes are already very high and Malaysia is currently the second highest country in the world in terms of beer excise duties.

GAB finance director Mahendran Kapuppial said that overall its net profit margin, which was 12.4% in the latest quarter, was “very healthy”. However, he said there are challenges ahead for the group, including commodity prices.

“We have a global tie-up with Asia Pacific Brewery (APB) (GAB’s parent company)... so we ride on those purchases as a synergy to mitigate any increases,” said Mahendran. GAB’s ties with APB provide access to bulk purchases of key ingredients such as aluminium and wheat.

Mahendran said GAB will try to combat future fluctuations in commodity prices by raising prices, which it did in FY11.

“We also do short-term hedging on currencies,” he said.

Ireland said while the group could expect to see a softening demand in the quarters ahead due to high commodity prices, there would be some quarters which could see better margins. Seasonal distortion due to festivities sometimes impacts the group’s margins as much strategic pricing takes place during the period, he explained.

Research houses have varied opinions on GAB’s strong performance.

Maybank Investment Bank Research yesterday raised its recommendation for GAB to a “buy”. “What is positive is that Guinness would appear to be gaining market share in the malt liquor market and with decent gross yields of about 5.6% in FY12, we upgrade our call to a “buy” with a marginally higher target price of RM11.50 (from RM11.30) on raised earnings,” it said.

CIMB Research gave GAB a “neutral” recommendation because it said that “there are no near-term catalysts in sight for the group”. However, it added that “the stock’s solid dividend yields of 5% should provide support to its share price”. The report also said even though Budget 2012 did not include an excise duty hike, CIMB Research does not rule out the possibility of an off-budget duty increase next year.

Affin Investment Bank downgraded GAB from “buy” to “add”, taking into account its recent stock price gain. It said since Budget 2012, “GAB’s share price has rebounded strongly by 14% to RM10.74, narrowing the gap to our target price of RM11.92 to less than 15%.”

The stock rose 20 sen or 2% to RM10.94 on volume of 147,300 shares yesterday.


This article appeared in The Edge Financial Daily, November 4, 2011.
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