Kenanga raises earnings outlook for Carlsberg

PETALING JAYA: Kenanga Research has increased its FY18 and FY19 earnings for Carlsberg Brewery Bhd on the back of improved contributions from Lion Brewery in Sri Lanka.

“We increased our FY18E and FY19E earnings by 4.3% and 3.5% respectively as we improved contributions from Lion Brewery. Additionally, we increased our Malaysian demand assumptions following the stronger results,” it said in its report today.

For the nine months ended Sept 30, the group reported core Patami of RM205 million, which amounted to 82% of Kenanga Research’s full-year expectations.

“We deem this to be above but within our consensus estimates, mainly due to better-than-expected contribution from its Sri Lankan associate, Lion Brewery. Malaysian sales were also better than expected, subsequent to our previous adjustments for softer demand post-Sales and Services Tax (SST),” it said.

Moving forward, it expects Carlsberg’s on-trade sales (at food and beverage establishments) to be dented by Sales and Services Tax finally kicking in, as these establishments would have to bear the brunt of both taxes.

“We anticipate demand to be skewed towards the off-trade market (retails, supermarkets), albeit being a lower margin channel. Still, the group’s continued emphasis on its premium mix could bolster the overall performance in the local scene,” it said.

Meanwhile, HLIB Research does not expect any hike in alcohol excise duty as the structure is already the third highest globally.

“We opine a hike in excise duty would result in growth in the illicit market at the expense of the legal volumes, which will result in reduced tax collection. For this reason, a hike in alcohol excise duties is unlikely,” it said in its report.

It expects the government and Royal Malaysian Customs to continue their efforts to fight contraband and strengthen the legitimate tax paying portion of the beer market in Malaysia and hence the government’s revenue collection of excise duty.

On the recent increase in the minimum age for purchasing alcohol to 21, it expects this to result in lower industry volumes due to a smaller pool of legal consumers.

HLIB Research maintained its “buy” call with an unchanged target price of RM22.70.

Carlsberg’s fell 1.62% or 32 sen to close at RM19.40 with 51,600 shares traded. It was one of the top losers on the bourse today.

Source: The Sun Daily

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