GAB – Fundamental Analysis (25 Nov 2015)

2015-11-25 Uncategorized FBMKLCI, Fundamental Analysis, GAB, GUINNESS ANCHOR BHD,KLSE

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/gab-fundamental-analysis-fy15

Excel – http://1drv.ms/1kSIXil

Latest Financial – Q1 2016 Financial Report (17 Nov 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4929593

FY16 Q1 Results Highlight:

• GAB recorded 1QFY16 revenue of RM405m (+3% yoy) and core earnings of RM63.1m (+15.6% yoy) due to higher sales volume from its core beer brands (better product mix) and improved selling prices. Furthermore, the group benefited from the Government’s measures against contraband beers which has aided the duty paid market.
• Net profit increased by RM63.1m or 15% yoy due to optimized channel execution and improved cost efficiencies.

Valuation:

• Absolute EY%:
  • Historical
    • Trailing:
      • FY15 (EPS: 0.709) – 15.454 (Uncertainty Risk: MEDIUM)
      • R4Q (EPS: 0.737) – 16.067 (Uncertainty Risk: MEDIUM)
    • Forward:
      • FY16 (EPS: 0.757 ± 5%) – From 15.671 to 17.321 (Uncertainty Risk: MEDIUM)
      • FY17 (EPS: 0.789 ± 5%) – From 16.344 to 18.064 (Uncertainty Risk: MEDIUM)
    • EPS applied to reach the current stock price (14.38): 0.660
  • Industry
    • Trailing:
      • FY15 (EPS: 0.709) – 13.37 (Uncertainty Risk: VERY HIGH)
      • R4Q (EPS: 0.737) – 13.90 (Uncertainty Risk: HIGH)
    • Forward:
      • FY16 (EPS: 0.757 ± 5%) – From 13.56 to 14.98 (Uncertainty Risk: HIGH to VERY HIGH)
      • FY17 (EPS: 0.789 ± 5%) – From 14.14 to 15.63 (Uncertainty Risk: MEDIUM to HIGH)
• 5-Y DCF:
  • Good Scenario (12.0% 14.0%): From 17.66 to 18.91 (Uncertainty Risk: LOW to MEDIUM)
  • Base Scenario (9.0% 11.0%): From 15.92 to 17.06 (Uncertainty Risk: MEDIUM)
  • Bad Scenario (6.0% 8.0%): From 14.32 to 15.37 (Uncertainty Risk: MEDIUM to HIGH)
  • Ugly Scenario (2.0% 4.0%): From 12.40 to 13.33 (Uncertainty Risk: VERY HIGH)
  • At current price (14.38), based on RDCF, assumption of FCFF growth rate in the next 5 years is 6.2%.
• In my opinion, fair value of GAB range from 15 to 16. Uncertainty risk of fair value is MEDIUM.

Going Forward:

• For FY16, it will be challenging for GAB to pass on large price increases to consumers in view of
  • The softer environment
  • Anti-profiteering act which prohibits price increases if it increases profitability excessively.
• I will continue to hold and accumulate this stock for my kids.

At the time of writing, I owned shares of GAB.