Kenanga upgrades Carlsberg to Market Perform, raises TP to RM23

KUALA LUMPUR: Kenanga research has upgraded Carlsberg Brewery Malaysia Bhd to market perform with a higher target price of RM23 from RM21.80 previously.

The research house said that the Malaysian market would support earnings growth growth as the Singapore arm could be faced by slowing demand in the medium term due to the signing of the European Free Trade Agreement.

Meanwhile, the Sri Lanka associates see few expansionary opportunities given their already dominant position in a limited growth market.

“Sticky demand appears to have softened any adverse impact from the higher SST-driven prices,” it said on the resilience of the local market.

“Further, a higher premium brand mix could also serve as a means to garner a stronger niche-following as opposed to less premium products.”

In its recently announced earnings, Carlsberg posted 1Q19 revenue of RM659.9mil due to growth in both Malaysia and Singapore.

1Q19 earnings of RM87.6mil and interim dividend of 21.5 sen were within Kenanga’s and consensus estimates.

According to Kenanga, Malaysian growth was driven by higher post-SST prices as well as better demand for premium offerings while Singapore enjoyed stronger sales returns from its CNY marketing efforts.

In Sri Lanka, Lion Brewery’s associate gains of RM5.6mil included a one-off insurance settlement of RM4.7mil in relation to a past flood, growing its contributions by over 500%.

Operating profit however only increased 11% as group margin of 16.9% was impacted by higher commercial-related investments in Malaysia.

Source: TheStar