Carlsberg - Time For a Carlsberg; Raising TP

By Maybank IB Research
29 Aug 2012


Maintain BUY.  Carlsberg’s 2Q12 net profit of  MYR37.7m  made up 50.9% of our and consensus FY12 forecasts. We are, however, raising our FY12-14 earnings estimates by 4-8%, to reflect margin expansion from increasing Singapore  contributions and an  improving local production mix tilted towards premium beers. We raise our DCF-based TP to MYR13.50 (from MYR12.00; +13%), which implies a still-decent
FY13 net dividend yield of 4.8%.


2Q12 results in line.  Carlsberg reported 2Q  net profit of MYR37.7m (+21.7% YoY, -27.9% QoQ). The QoQ fall is not unexpected, as 2Q has historically  tended  to be  weak, crimped by both post-festive season belt-tightening and  a  pause before trade loading in 3Q ahead of the national budget announcement. Carlsberg declared a 5sen, single tier interim dividend (vs. a 5sen gross dividend in FY11).

A mixed bag. EBIT margins of the Malaysian operations contracted to 11.7%  in 2Q  vs. 14.2% in  1Q due  to a spike in advertising and promotional costs  during Euro 2012. Singapore EBIT margins were fairly teady at 16.7% (1Q: 16.9%). Singapore accounted for 30.4% of group EBIT during the quarter. Carlsberg’s market share in  Malaysia and Singapore remain stable at an est. 44% and 20% respectively.

Stronger earnings  are  expected, primarily  from  rising  Singapore contributions (now  estimated at 40% of EBIT vs. 30% previously),  as Carlsberg benefits from i) lower taxes and ii) higher EBIT margins. Also, while Carlsberg’s Malaysian market share remains at c.44%, we expect its new locally-produced premium brews, Asahi and  Kronenbourg, to incrementally bolster margins. We understand that Asahi has successfully captured up to 5% of the domestic premium beer segment from established rivals e.g. Heineken, Kilkenny, in just two years.

Good payout, solid yields. Our higher DCF-derived TP of MYR13.50 translates to a FY12-13 PERs of 22.5-20.4x respectively. We expect a dividend payout of 98% going forward, well in line with historic norms. At our MYR13.50 TP, Carlsberg will still offer investors decent yields of 4.8% and 5.3% for FY12 and FY13 respectively.

BUY (unchanged)

Share price: MYR12.30
Target price: MYR13.50 (from MYR12.00)

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