Kenya: Carlsberg Brewery Malaysia 'hold' kept - Kim Eng
Kim Eng Securities said it is maintaining its 'hold' call on Carlsberg Brewery Malaysia Bhd with a target price of 5.80 rgt a share after the company posted a first quarter net profit that was within expectations, according AFX News.
Carlsberg said that first quarter to March 2005 net profit fell 14.8 % to 23.84 million rgt on competition-driven price discounting and brand and marketing costs associated with the launch of SKOL beer.
In a note, Kim Eng said that Carlsberg's first quarter net profit came in slightly ahead of expectations, accounting for 27 pct of its fiscal year to December 2005 forecast and consensus estimates.
The brokerage said that the sharp quarter-on-quarter recovery was apparent in the first quarter, with 61 pct higher sales and 135 pct higher operating profit from the fourth quarter of 2004.
Kim Eng said that a steep hike in excise duty has hurt volume sales of beer and stout as well as the market for low-priced imported and smuggled beers. The government increased duties on beer by 26 pct last September.
'The situation is made worse by a comparatively lower increase in excise duty on other imported alcoholic products, thereby encouraging a switch to other alcoholic beverages such as liquor and wine,' it added.
Kim Eng said that the stock is ideal for pension funds seeking high dividend yield and low volatility, with a gross yield of 7.7 pct and beta of 0.6 times.
It added that Carlsberg should be able to maintain a consistently high dividend payout given its strong cash position and minimal capital expenditure.
The brokerage said that Carlsberg is debt-free, with cash reserves of 267 mln rgt or 0.87 rgt per share as at March 31, 2005.
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