GUINNESS ANCHOR BERHAD Value Evaluation

Guinness is another well-established listed brewery manufacturing company which possesses lots of upside potential and expansion opportunities. In terms of its product mixed, one of the most favored and unique products that are offered is Shandy with least Alcohol content where it is suitable for the light drinker. In discovery of market expansion, targeting of light drinker is one of the most strategic ways to fight for additional market share. Also, the parent company itself is also well known with the sponsoring of “The Guinness World Record” record book which gains tremendous amount of popularity worldwide via television broadcasting and published annual record books, even non-drinker realize the “Guinness” brand of the “World Most”. As for capital expenditure, the company need not rely on research and development for survival purpose however in every beverage industry, the most common ways to expand is to acquire another company or brand in order to decrease the number of competitors and strengthen its front line where huge expenditure can be incurred sometimes. Brewery industry requires heavy capital investment as well as unique brewery recipes which makes it hard for others to enter.

Similar to Carlsberg, brewery industry find it hard to expand in a large scale in a Muslim-dominated environment due to religious and political pressures. As fierce competitions are going on and companies are fighting for shelves spaces in retails and restaurants, strong marketing campaigns are deployed to sustain and increase the company’s market shares where it consumes almost 40% of the gross profit portion from the company annually.

Operating cash level in the past ten years appears to be climbing steadily where the company is performing healthily. Both ratios are also far beyond the standardized level where the company is efficiently employing its fund and assets to produce profit. Management of cash in the past was fine except for 2013 and 2012 performance where RM350 million worth of additional funds are collected and the dividend distribution is increased to the range between 200% and 300%. It is especially unhealthy when company used borrowed fund to issue dividend. Hence, it is not a good pick at the moment. 

Stock: GAB Code: 3255

CARLSBERG BREWERY MALAYSIA BHD Value Evaluation

Carlsberg has been a well-established brewing company for a long time. Being able to penetrate into different markets, the green label Carlsberg has become a popular branding among consumers. However, faceoff from its powerful competitor such as Guinness Anchor Berhad, it is difficult for it to fight for beer market share in such an intense market. However, one thing good about brewery industry is that they need not much research and development expenditure to survive in the market. On the other hand, acquisitions of subsidiaries may exhaust much of the company’s cash reserve. With clubbing and pub industry on the grow in Malaysia, demand of alcoholic beverage is on the rise as well which in turn guarantee the future earnings of brewing manufacturer.

As alcoholic substance may be abused and misused, government monitors the distribution closely and imposes heavy duties at the same time to curb the demand of alcoholic beverage. This makes the industry having hard time in expanding their business in Malaysia. Also, recent import of cheap brewing products from Thailand and Indonesia has further slashed the market share of local established brewing company.

Based on the ten years cash flow from operating activities, although there are fluctuations in between, we can see that Carlsberg find its way up in slow but steady pace. Both ratios are up to satisfactory as not much capital expenditure is required to support the business manufacturing line. Judging from its cash flow statement, Carlsberg maintains a high cash level for several years which indicates a good cash management. However, price earning at 19 is considered high which means the company is overbought. The company potential has been realized.
Stock: CARLSBRG Code:2836