Strong third quarter results for GAB on CNY seasonal sales

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KUCHING: Guinness Anchor Bhd’s (GAB) reported a strong RM442.5 million revenue for its third quarter of the financial year 2013 (3QFY13) on the back of strong Chinese New Year (CNY) sales.

This figure was a 21.3 per cent jump year on year (y-o-y) while earnings expanded to RM61.2 million, an increase of 18.7 per cent y-o-y.

“The high y-o-y revenue and profit growth was a result of the later timing of the CNY this year, which delayed CNY-related purchases to 3Q versus 2Q in FY12,” explained research firm RHB Research Institute Sdn Bhd (RHB Research) in a report on the group yesterday.

“For comparison purposes, 2QFY13 earnings grew just 0.5 per cent y-o-y due to the absence of CNY buying.”

On a sequential basis, RHB Research noted that GAB’s bottomline was softer due to high CNY marketing and promotion expenses. Meanwhile, 9MFY13 earnings rose to RM184.1 million (an increase 6.7 per cent y-o-y), representing 81 per cent and 82 per cent of our and consensus’ full-year forecasts.

The research house noted that 4Q is typically the year’s weakest quarter for GAB due to the lack of festivals between April and June, as well as the absence of inventory stocking up among retailers in 3Q in anticipation of excise duty being raised in 2013 Budget.

“As such, the company’s 4Q profits had in the past two years made up 16.4 per cent of its full-year earnings.”

The improvement in the group’s margins was reflected in 9MFY13’s revenue, which dropped one per cent y-o-y amid Guiness’ conscious efforts to trim its duty-unpaid sales volume.

Profits, however, surged, led by an improving product/channel mix as well as better cost control. As a result, RHB Research noted that earnings before interest, tax, depreciation and amortisation margins widened 1.8 percentage points to 22 per cent.

“We are keeping our earnings forecasts unchanged but raising our fair value to RM20.46 per share.”