KUALA LUMPUR, Oct 20 (Bernama) -- Bursa Malaysia’s benchmark index edged higher at the close as bargain hunting emerged following Monday’s sharp sell-off, although it narrowly failed to reclaim the 1,600 level, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) gained 3.83 points, or 0.24 per cent, to 1,599.58 from Monday’s close of 1,595.75. The index opened 3.18 points lower at 1,592.57, marking its intraday low, and reached an intraday high of 1,602.83 in early trading. On the broader market, decliners outnumbered gainers 751 to 331, while 499 counters were unchanged, 1,259 untraded and 10 suspended. Turnover rose to 2.86 billion units worth RM2.42 billion against Monday’s 2.49 billion units worth RM2.38 billion.
Upgrade from sell to HOLD with target price (TP) of RM15.52
Review
- Carlsberg reported its 9MFY16 net profit of RM157.9mn (+11.7% YoY). The results came within ours (71%) but below streets estimates (66%). No dividend was declared, similar to last corresponding period.
- YoY, the group revenue grew marginally by 0.6% to RM1.2bn. This was driven by positive contribution from Singapore segment. The segment recorded a double-digit growth of 10.6% to RM424.6mn supported by 1) stronger sales volume as well as 2) higher contribution from subsidiary company Maybev. Meanwhile, Malaysia segment logged a slight contraction of 3.9% to RM820.3mn underpinned by loss of contribution from Luen Heng business. Note that, Luen Heng is a distributor and supplier of wines and spirit and the disinvestment was completed last August 2015.
- For 9MFY16, the group’s operating profit expanded by 15.5% YoY to RM204.5mn owing to strong contribution from both segments. This was attributable to 1) effective costs control and positive products mix, 2) increased contribution from Maybev, and 3) strengthening of Singapore Dollar against MYR. Thus, the group’s EBIT margin lifted by 2.1p.p.
Impact
- No changes to our earnings forecasts at this juncture.
Outlook
- With the acquisition of Maybev in April 2014, the group has been witnessing increased contributions from its Singapore operations. We take comfort that such geographical diversification has allowed the group to offset the slow performance seen in its Malaysian operations and positively benefitted from weak Ringgit.
Valuation
- We maintain our target price at RM15.52 based on DCF methodology (COE: 7.6%, g: 2.5%). However, we upgrade the stock from Sell to Hold since the sharp drop in its share price recently
Source: TA Research - 29 November 2016
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