CARLSBG–Fundamental Analysis (28 May 2014)

CARLSBG Analysis:-

Excel –

My View:-

– Fair values/Market Timing:
  – 10-Y DCF: 12.56 – 15.42 (MOS:4% – 22%)
  – Absolute EY%: Buy below 9.99, sell above 12.09 (MOS: -0.09%)
– At the current price (12.1 as of 27 May 2014), CARLSBG is already fully valued or over valued. Besides, MOS derived from all models are not up to my benchmark.
– 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.
– 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%). 10.24 – 11.50 is a good support zone, from technical aspect. Chances of CARLSBG dropping below this zone is low.
– CARLSBG is determined to move away from a single star beer product company to become a star beer portfolio company. Over the past 10 years, CARLSBG has been trying to launch a couple of new products into the market. To date, however, its Carlsberg Green Label is still viewed as the group’s only crown jewel. As such, a reshuffle has been undertaken in its top management team over the last 2 to 3 years with the aim of bringing good changes to the group. Besides, it has also appointed a few brand managers to oversee the brand building efforts across a few main products, whereby premium brands are expected to form a larger proportion of its new product portfolio. While efforts are being made to build market share for its premium products, the Carlsberg Green Label will remain as the bread and butter of the group. Whether or not CARLSBG will be able to return to its former glory, it is still too early to tell, but the good efforts warrant CARLSBG a buy/hold call for the long term. There are downside risks if things do not turn out as expected.
– I may accumulate CARLSBG if it dropped below 11.00.

Latest Financial – Q1 2014 Financial Report (27 May 2014)

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


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