PETALING JAYA: Guinness Anchor Bhd’s (GAB) fundamentals are expected to remain intact despite the bills of demand from Royal Malaysia Customs for payment of additional excise duties and sales tax totalling RM56.3 million.
“While the claims might cause a temporary dent on sentiment, we maintain our positive stance on the company as its strong fundamentals remain intact, unaffected by the tax claims,” said Kenanga Research.
The research house said it continues to like GAB for its market-leading position in the local malt liquor market (MLM), while the strategy of focusing on the premium segment by embarking on aggressive marketing activities will help sustain earnings growth.
“We also believe the MLM industry is less vulnerable to the soft consumer sentiment with net profit growth of 8.3% and 9.6% forecast for FY16 and FY17, respectively.”
It added that it was surprised by the tax claims by Customs, which were issued nearly two years after the affected period.
“We view the claim negatively as it might cause an overhang on the share price by denting sentiment. To quantify the financial impact, the amount demanded translates into 24.3% of FY16 estimated net profit,” said Kenanga.
It said this is the second tax claim slapped on a local brewery company a year after Carlsberg Brewery Malaysia Bhd, which received bills of demand from Customs amounting to RM56.4 million for the period of July 1, 2011 to Jan 14, 2014.
“We also think that it will be a long-drawn case, similarly to Carlsberg’s case, which is still unresolved after one year.”
MaybankIB Research said this could potentially impact 2016 earnings negatively by up to 26%, if enforced.
“A back-of-the-envelope calculation would suggest a negative impact of 26% to FY16 earnings. However, as in the case of Carlsberg, GAB is likely to not make any provisions against this sum on contestable grounds. We maintain our earnings forecasts pending further guidance from management,” said MaybankIB.
On the impact on GAB’s earnings, HLIB Research said should the liability materialise, it is forecasting a net profit of RM234.9 million for FY16, minus the amount of RM56.3 million from the bills of demand. This would decrease its FY16 net profit forecast by 24%, thus diluting earnings per share (EPS) by a similar magnitude of 24% to 59.12 sen per share from 77.7 sen per share.
