*** In Annual Report 2014, CARLSBG made some changes to Balance Sheet and Cash Flow Statement. I have updated the figures. The impact is only very slight change to valuation.
Excel – http://1drv.ms/1AG006N
Notes – http://tinyurl.com/kdtolbw
- 5-Y DCF:
- Good Scenario: 10.95 (Fair value uncertainty: VERY HIGH)
- Base Scenario: 9.57 (Fair value uncertainty: EXTREME)
- Bad Scenario: 8.34 (Fair value uncertainty: EXTREME)
- Ugly Scenario: 7.25 (Fair value uncertainty: EXTREME)
- At current price (13.24), based on RDCF, assumption of FCFF growth rate in the next 5 years is 15.8%.
- Absolute EY%:
- FY14 (EPS: 0.692) – Fair value 12.71 (Fair Value Uncertainty: HIGH)
- R4Q (EPS: 0.692) – Fair value 12.71 (Fair Value Uncertainty: HIGH)
- FY15 (EPS: 0.712) – Fair value 13.09 (Fair Value Uncertainty: HIGH)
- FY16 (EPS: 0.754) – Fair value 13.86 (Fair Value Uncertainty: HIGH)
- EPS applied to reach the current stock price (13.24): 0.721
- 5-Y DCF:
- 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.
- 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.
- Valuation wise, CARLSBG is fully or over valued, but its Dividend Yield is 5.3%. You basically pay premium to buy an outstanding dividend counter.
Latest Financial – Annual Report 2014 (23 Mar 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1909629
At the time of writing, I owned shares of CARLSBG.