Guinness Anchor Bhd (Rm5.40 as at March 5) TP=RM6.20

Guinness Anchor Bhd (Rm5.40 as at March 5)

Guinness Anchor Bhd recorded sales of RM1.1bil for 2007 and RM1.2bil for 2008 financial year. Pre-tax profit was RM152.8mil and RM168.8mil respectively.

Comment by Maybank Research: The malt liquor market (MLM) registered a double-digit growth in 2008. Guinness Anchor Bhd, being the market leader with an estimated 58% share, benefited from the growth, registering more than 12% increase in volume in 2008.

Its first half year 2009 sales rose 12.8% year-on-year, which is in line with industry volume growth. We understand that cheap retailing prices seen in hypermarkets during the Chinese New Year sale reflects heavier price discounting by its key rival, as well as retailer subsidies.

Nevertheless, we still expect Guinness to deliver 6% to 7% earnings growth in FY09. Our forecast implicitly assumes that 2H09 earnings would flatten out or contract mildly year-on-year as consumers reduce discretionary spending amid a sharp economic slowdown.

Adding an important buffer to our forecast, it appears that the government is in favour of abolishing the security ink ruling, which could provide Guinness an annual savings of RM15mil. Finally, we take the view that the government is unlikely to raise excise duties on beer and stout this year.

Guinness remains one of our favourite high yielding picks, providing a prospective FY09 gross dividend yield of 9.4%, lifting the prospects of a more generous dividend policy.

Recommendation: BUY with a target price of RM6.20.