Excel – http://1drv.ms/1mLuXGq
– Fair values/Market Timing:
– 10-Y DCF: 11.47 – 14.09 (MOS: -25% -> -1%)
– Absolute EY%: Buy below 10.48, sell above 13.20 (MOS: -8.31%)
– At the current price (14.30 as of 11 May 2014), GAB is already fully valued or over valued. Besides, MOS derived from all models are not up to my benchmark (24.71%).
– The dividend return spread between GAB and CARLSBG vs the 10-year MGS yield has narrowed to only 30-40bpts vs the historical 10-year average of 280-290bpts. (Source: RHB)
– Going forward, I remain conservative and skeptical above volume growth in the brewery sector as some reports show that the industry is saturated, coupled with several other external factors such as rising fuel costs, inflation as well as potential exposure to excise duty hike in the near future. However, earnings should be sustainable at current levels.
– Based on my growth analysis, as of FY14Q3, GAB only achieved 71.4% (1,197,717) of FY13 revenue (1,676,348), and 69.5% (151,270) of FY13 net profit (217,604). Therefore, most likely, I estimate GAB’s FY14 result will be flat or slightly lower if compare to FY13.
– 2014 will be a challenging year for brewers due to competition from contrabrand beers and as consumer spending dwindles. Fortunately, this will be partially alleviated by the Visit Malaysia Year 2014 event.
– In my opinion, there is still some downside risk even though the share prices of both stocks have fallen sharply from last year’s peaks (down 30-45%). 11.60 – 13.00 is a good support zone, from fundamental and technical aspect. Chances of GAB dropping below this zone is low.
– I may accumulate GAB if its price got big discount, such as below 11.00.
Latest Financial – Q3 2014 Financial Report (9 May 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1618941
At the time of writing, I owned shares of GAB.