Carlsberg Brewery Malaysia Bhd (Dec 22, RM8.40)
Maintain market perform at RM8.40 with fair value of RM8.05: Carlsberg has recently been awarded the rights to locally manufacture, sell and distribute Asahi Super Dry after a recent agreement with the brand’s owner, Asahi Breweries.
Through Carlsberg’s subsidiary, Luen Heng (LHFB), Carlsberg started the local distribution of Asahi Super Dry since July 2010. Now, Carlsberg will be manufacturing Asahi Super Dry locally. We had previously highlighted Carlsberg’s plans to locally manufacture one or two of the beers that are distributed by LHFB, although, we had initially speculated that one of the beers was going to be Stella Artois.
Asahi Super Dry was previously an imported premium beer. As such, its pricing was also at the high end of the local beer market at about 50% higher than the mainstream Carlsberg Green Label and Tiger Beer. However, now that Carlsberg is manufacturing Asahi Super Dry locally, we believe its price levels would go down to more competitive locally brewed premium beer levels, which are currently priced at a 20% premium to the mainstream brands. As such, Asahi Super Dry would now compete directly in the premium beer segment which is currently dominated by Heineken.
Given that Asahi Super Dry would be manufactured locally, we believe its margins would also be better given that Carlsberg does not need to pay import duty on the beer. However, we highlight that Asahi Super Dry was previously in the imported premium beer segment, together with the likes of Hoegaarden and Stella Artois etc, which combined, accounts for less than 5% of the overall beer market. As such, despite Asahi Super Dry’s more competitive pricing, we do not expect the beer to provide any significant earnings impact for Carlsberg in the near-term.
Risks to our view. 1) Sharp drop in TIV (total industry volume); 2) Continued decline in Carlsberg’s market share (as opposed to our flat market share assumption); and 3) possibility of excise duty hike going forward.
No change to our earnings forecast.
Our DCF-derived (discounted cash flow) fair value remains unchanged at RM8.05. Although we remain positive on Carlsberg’s earnings growth outlook for 2012, underpinned mainly by the Euro 2012 which would provide a sales boost in 2Q and 3Q, we believe its share price has fully reflected this. We reiterate our “market perform” call. — RHB Research, Dec 22
This article appeared in The Edge Financial Daily, December 23, 2011.
Maintain market perform at RM8.40 with fair value of RM8.05: Carlsberg has recently been awarded the rights to locally manufacture, sell and distribute Asahi Super Dry after a recent agreement with the brand’s owner, Asahi Breweries.
Through Carlsberg’s subsidiary, Luen Heng (LHFB), Carlsberg started the local distribution of Asahi Super Dry since July 2010. Now, Carlsberg will be manufacturing Asahi Super Dry locally. We had previously highlighted Carlsberg’s plans to locally manufacture one or two of the beers that are distributed by LHFB, although, we had initially speculated that one of the beers was going to be Stella Artois.
Asahi Super Dry was previously an imported premium beer. As such, its pricing was also at the high end of the local beer market at about 50% higher than the mainstream Carlsberg Green Label and Tiger Beer. However, now that Carlsberg is manufacturing Asahi Super Dry locally, we believe its price levels would go down to more competitive locally brewed premium beer levels, which are currently priced at a 20% premium to the mainstream brands. As such, Asahi Super Dry would now compete directly in the premium beer segment which is currently dominated by Heineken.
Given that Asahi Super Dry would be manufactured locally, we believe its margins would also be better given that Carlsberg does not need to pay import duty on the beer. However, we highlight that Asahi Super Dry was previously in the imported premium beer segment, together with the likes of Hoegaarden and Stella Artois etc, which combined, accounts for less than 5% of the overall beer market. As such, despite Asahi Super Dry’s more competitive pricing, we do not expect the beer to provide any significant earnings impact for Carlsberg in the near-term.
Risks to our view. 1) Sharp drop in TIV (total industry volume); 2) Continued decline in Carlsberg’s market share (as opposed to our flat market share assumption); and 3) possibility of excise duty hike going forward.
No change to our earnings forecast.
Our DCF-derived (discounted cash flow) fair value remains unchanged at RM8.05. Although we remain positive on Carlsberg’s earnings growth outlook for 2012, underpinned mainly by the Euro 2012 which would provide a sales boost in 2Q and 3Q, we believe its share price has fully reflected this. We reiterate our “market perform” call. — RHB Research, Dec 22
This article appeared in The Edge Financial Daily, December 23, 2011.
