To benefit from pick-up in sales volume
? 1Q22 core net profit of RM92.4m (+36.7% yoy) was in line with estimates,
with growth driven by higher sales volume and selling price hikes.
? We project 18% growth in FY22F sales volume, to be driven by the easing of
lockdown measures, border reopenings, and new product launches.
? Reiterate Add, with lower DDM-based TP of RM25.20.
1Q22 core net profit rose 36.7% yoy, within expectations
1Q22 revenue rose 22.9% yoy, from higher sales volume (easing of lockdown measures)
and selling price hikes. This led to 1Q22 EBITDA margin rising 1.4% pts yoy to 19.3%,
thanks to higher economies of scale and more profitable sales mix. Accordingly, 1Q22 core
net profit rose 36.7% yoy to RM92.4m, further aided by higher associate contribution
(+70.1% yoy). 1Q22 net profit account for 32% of our and 35% of Bloomberg consensus
full-year estimates; we deem this in line as 1Q is typically a stronger quarter. An interim
dividend of 22 sen was declared (73.4% payout).
Stronger qoq results from CNY festivities
On a qoq basis, 1Q22 revenue and core net profit rose 20.6% and 23.3% respectively,
driven by strong performance from both Malaysia (revenue/operating profit rose 12.5%/
22.3%) and Singapore operations (1Q22 revenue/operating profit rose 35.3%/28.6%). This
was thanks to seasonality factors (Chinese New Year, CNY, fell in 1Q22) and gradual
easing of lockdown measures in both countries.
Expecting 18% growth in CAB’s FY22F overall sales volume
We expect CAB to post a robust sales volume recovery in FY22F (+18% yoy), to be driven
by higher on-trade sales, thanks to: i) gradual easing of lockdown measures in both
Malaysia and Singapore since 4Q21, ii) reopening of borders for both countries in 2Q22,
iii) new product launches (delayed since 2020), iv) more marketing activities, and v)
reopening of night entertainment outlets in Malaysia from 15 May onwards.
Higher input costs not a concern, in our view
Despite the recent rise in input costs, we do not expect any major impact on CAB’s GP
margin given that raw material and packaging costs were equivalent to only 8.3% of its
FY21 revenue. Instead, we expect CAB to post better FY22F GP margin from selling price
hikes (since 4Q21) and more profitable sales mix. Note that we believe that higher on-trade
sales (we estimate 50% of CAB’s sales pre Covid-19 pandemic) will also drive margin
expansion, given on-trade sales fetch higher margins than off-trade sales.
Maintain Add
We adjust our FY22-24F EPS estimates on minor housekeeping matters (recent release
of its FY21 annual report). Our DDM-based TP is lowered to RM25.20 (beta: 0.8x, g: 2.8%)
as we adjust our risk-free rate to 4% (previously 3.5%; amid the recent rise in government
bond yields). We still like CAB given: i) its attractive valuation (CY23F P/E at a 26%
discount to its 5-year mean of 27x), ii) that it benefits from a recovery in economic activity,
especially on-trade activities, and iii) strong brand equity in Malaysia.