Fundamental Analysis for GUINNESS ANCHOR BHD Date of Analysis: 3-Jun-11 Company Name: GUINNESS ANCHOR BHD Board: Main Stock Code (Bursa): GAB FBMKLCI: N Stock Code (Bloomberg): GUIN:MK Sector: CONSUMER PRODUCTS Stock Code (Reuters): GUMS.KL Industrial PE: 19.2 Price as of Analysis: 1.44 Rolling EPS:.62 Stock Grade Dividend Cash Cows Financial Statements: Year over year, Guinness Anchor Berhad has been able to grow revenues from 1.3B to 1.4B. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 72.62% to 71.64%. This was a driver that led to a bottom line growth from 142.M to 152.7M. 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Income Statement -> Sales Revenue & Net Income After Tax increasing in the past 4 years. 1.2. Cash Flows -> Net Cash from Operations increasing in the past 4 years. 1.3. Growing/consistent revenue in EPS, revenue and net profit in the last 4 quarters. 1.4. The current quarter's EPS is up more than 15% from the same quarter the year before. 2 - Sustainable Competitive Advantage 2.1. Strong brand, monopoly or barriers to entry 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) high & consistent 2.3. Consistently high ROE > 15% 3 - Strong Future Growth Drivers 3.1. Able to deliver double-digit growth in next 3-5 years 3.2. LT Growth Rate is positive 4 - Conservative Debt 4.1. Long term debt < 4 times Net Profit 4.2. Debt/Equity Ratio < 1 4.3. Current Ratio > 1 5 - Positive Accounting KPI & Ratios 5.1. DUE-D Basic > 7%
5.2. FQA Score > 6% 5.3. SWC Score > 7% p.a. 5.4. ROIC > 15% 6 - Healthy Cash Flow 6.1. Working capital increase slower than sales 6.2. Short & declining "Cash Conversion Cycle" 6.3. Free Cash Flow / Sales > 5% 7 - Management is Holding/Buying Stock 7.1. Is key management holding/buying large proportion of stock. 8 - Risks are Managed 8.1. Understand the risks of the company and how it is managed. 9 - Price is below Intrinsic Value 9.1. Price is below Intrinsic Value (Bonus: Price can double within 3 years) 1 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 1.1. Stock price breaks out of consolidation/dip on an uptrend and above 2 and 5 moving averages on monthly chart.
1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Income Statement -> Sales Revenue & Net Income After Tax increasing in the past 4 years. RM (') 26 27 28 29 21 TOTAL REVENUES 976,13 1,72,112 1,194,62 1,285,423 1,358,633 NET INCOME 128,197 112,561 125,857 141,988 152,691 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, 1.12258645 1.68387968 3.367741935 26 27 28 29 21 TOTAL REVENUES NET INCOME 1.2. Cash Flows -> Net Cash from Operations increasing in the past 4 years. RM (') 26 27 28 29 21 NET CASH FROM 13,224 145,195 156,126 121,193 143,12 OPERATIONS 18, 16, 14, 12, 1, 8, 6, 4, 2, 26 27 28 29 21 NET CASH FROM OPERATIONS
1.3. Growing/consistent revenue in EPS, revenue and net profit in the last 4 quarters. 45 4 35 3 25 2 15 1 5 421414 37817 366631 351916 38713 3/1/21 6/1/21 9/1/21 12/1/21 3/1/211 Turnover Trend Net Profit Trend EPS Trend 25 2 15 1 5 21.4 15.38 16.21 11.81 12.81 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Quarter 1.4. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: 5%
2 - Sustainable Competitive Advantage 2.1. Strong brand, monopoly or barriers to entry 1. Does it have a monopoly situation? NO 2. Does it have a strong leading brand? Very Strong 3. Does it have a high barriers to entry? High 4. Does it have market leadership? Very Strong 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) high & consistent Gross Profit: Profit After Tax: 385,4 Sales Revenue: 1,358,633 152,691 Minority Interest: Gross Profit Margin: 28% Net Profit Margin: 11% 2.3. Consistently high ROE > 15% 6 ROE 5 4 3 2 1 21 22 23 24 25 26 27 28 29 21
3 - Strong Future Growth Drivers 3.1. Able to deliver double-digit growth in next 3-5 years Summary of analyst reports on company and industry projections: Government keep increasing sin tax. Summary of CEO message on future prospects: 3.2. LT Growth Rate is positive LT Growth Rate: 2.59
4 - Conservative Debt 4.1. Long term debt < 4 times Net Profit Long Term Debt: Long Term Debt < 4 times Current Net Earnings (After Tax):. 4.2. Debt/Equity Ratio < 1 Debt/Equity Ratio:.41 4.3. Current Ratio > 1 Current Ratio (MRQ): 2.65
5 - Positive Accounting KPI & Ratios 5.1. DUE-D Basic > 7% DUE-D Basic: 7% 5.2. FQA Score > 6% FQA Score: 1% 5.3. SWC Score > 7% p.a. SWC Score: 3.91% 5.4. ROIC > 15% 27 28 29 21 EBIT (1-Tax 152,84 169,5 191,912 26,65 rate%) Total Equity 385,1 411,3 442,3 47,9 Short Term Debt Long Term Debt Cash & Equiv 154,65 183,374 163,772 149,626 ROIC 66.31% 74.37% 68.9% 64.32% 76.% 74.% 72.% 7.% 68.% 66.% ROIC 64.% 62.% 6.% 58.% 27 28 29 21
6 - Healthy Cash Flow 6.1. Working capital increase slower than sales 27 28 29 21 Sales Revenue 1,72,112 1,194,62 1,285,423 1,358,633 Sales Growth YOY 11% 8% 6% Inventory 39,9 65, 69,5 75,7 Accounts Receivable 139,826 143,35 176,777 197,568 Accounts Payable 14,247 172,281 162,97 155,64 Working Capital 39,479 36,24 83,37 118,24 Working Capital Growth YOY -8.75% 131.25% 41.89% Inventory Days 13.58 19.86 19.73 2.34 Days Receivable 47.6 1.12 1.68 3.37 Days Payable 47.75 52.64 46.28 41.66 Cash Conversion Cycle 13.44-31.66-24.86-17.95 14% 12% 1% 8% 6% 4% 2% % -2% 27 28 29 Sales Growth YOY Working Capital Growth YOY 6.2. Short & declining "Cash Conversion Cycle" 2. 1.. -1. -2. -3. -4. 27 28 29 21 Cash Conversion Cycle 6.3. Free Cash Flow / Sales > 5% Free Cash Flow/Sales: 8.8%
7 - Management is Holding/Buying Stock 7.1. Is key management holding/buying large proportion of stock. Shareholding Analysis: GAPL PTE LTD is the major shareholder.
8 - Risks are Managed 8.1. Understand the risks of the company and how it is managed. Risk Management:
9 - Price is below Intrinsic Value 9.1. Price is below Intrinsic Value (Bonus: Price can double within 3 years) Valuation Method Discounted Cash Flow Growth Rate 5Y - 2.59 3Y --.72 4.22 3.91 8.39/3 8.39/2 Dividend Discounted 13.28 1.69 Remark PE 15.8 13.9 12.6 Sector Avg. PE PE Model 9.8 8.62 7.81 11.79 PEG 1.7 1.21 1.34.89 Estimated IV: From 9.8 To 11.8 Discount from IV: From -6.5% To 11.5% Discount from IV is not more than 2% Based on PEG, it is currently overvalued.
1 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 1.1. Stock price breaks out of consolidation/dip on an uptrend and above 2 and 5 moving averages