4Q21: In-line
Maintain BUY with unchanged DCF-TP of MYR23.95
4Q21 results met our/consensus expectations. The brewery industry outlook remains positive with ongoing recovery in on-trade sales alongside easing movement restrictions. However, margin compression could occur in light of elevated raw material costs. Our FY22-FY23E earnings are unchanged and we introduce FY24E. BUY with a DCF-TP of MYR23.95 (WACC: 8%, LT growth: 3%) with decent yields of c.4%.
Within expectations
CAB’s 4Q21 core net profit of MYR71m (+23% YoY, +129% QoQ) brought FY21 core net profit to MYR206m (+10% YoY), at 101% of both our and consensus full-year earnings estimates. A final DPS of 46sen was declared which brought FY21 DPS to 56sen (core DPR: 83%).
Strong MY ops mitigated by weaker SG sales
4Q21 revenue increased 15% YoY on better Malaysia operations where sales grew 25% YoY upon the ease in lockdown restrictions and seasonally higher sales during the festive season. This was partially offset by weaker Singapore sales (-7% YoY) as dine-in restrictions were only loosened towards end-Nov 2021 (from 2 pax/table to 5). Group EBIT grew by a wider 89% YoY given better product mix and higher cost savings from its restructuring exercise in FY20. CAB’s FY21 mainstream brand volumes declined 11% YoY while its premium segment grew 15% YoY.
Planning for heavy capex in FY22
Sales volume recovery is expected to continue on an upward trajectory in FY22 (we have imputed +10% YoY) given higher vaccination rates and the absence of further lockdowns. That said, new COVID-19 variants (i.e. Omicron) could intermittently impact on-trade sales throughout the year. Rising input costs may also cause margin compression in sequential quarters, particularly aluminum and barley costs. Separately, CAB intends to conduct a massive upgrade to its existing production facility in FY22 (capex budgeted: MYR110m) to expand its filling capacity (bottling), increase automation, and improve its plant efficiency in terms of water/energy usage to meet its ESG targets. Hence, we now impute for FY22E capex of MYR153m (MYR43m previously).