The document provides a detailed analysis of GAB's financial performance for the fiscal year 2015, focusing on its business profile, ownership structure, economic moats, profitability metrics, and growth drivers. It highlights challenges such as regulatory pressures, competition from premium brands, and rising raw material costs while outlining GAB's strategic responses. Additionally, the report mentions changes in ownership with Heineken becoming the major shareholder and discusses future expectations amid a shifting market landscape.

1. GAB
FUNDAMENTAL ANALYSIS
Financial Year 2015 (30 Jun 2015)
L. C. Chong
25 January 2016 (http://lcchong.wordpress.com and https://goo.gl/jjkq4P)

2. DISCLAIMER
I am NOT an investment advisor nor a financial advisor, and no information provided
here is to be interpreted as a suggestion to buy or sell securities.
You and I may have different opinion, but I respect your opinion.
All figures in MYR and in '000s, except per share data
2

3. DECLARATION OF INTEREST
• At the time of writing, I owned shares of GAB.

4. SCOPE
• Figures and ratios are based on the figures reported in Annual Report or the latest
Q4 Quarterly Report (QR)
• Unless there is a need, this analysis will not include financial figures reported in Q1,
Q2 and Q3
• I will provide QR result highlights in my blog
• Valuation is not covered in this analysis
• I will provide valuation in my blog.

5. CHANGES
• 3 Nov 2015 – First write up of GAB in PowerPoint format

6. OTHER REFERENCES
• Alcoholic (KLSE) – Peer Comparison
• FY16Q2 Analyst Briefing Presentation

7. BUSINESS PROFILE
• Principally engaged in the production, packaging, marketing and distribution of
beverages, primarily alcoholic
• GAB’s principal business is in the production, packaging, marketing and distribution
of beer, stout and malt-based drinks under the Guinness, Anchor Smooth, Anchor
Strong, Tiger, Heineken, Kilkenny, Anglia Shandy, Malta, Paulaner and Strongbow
brands

8. BUSINESS PROFILE (CONT.)
• World-acclaimed iconic Asian beer TIGER BEER, and its doubly refreshing variant
TIGER RADLER;
• The World’s No. 1 stout GUINNESS;
• The World’s No. 1 international premium beer HEINEKEN;
• The all-time local favourite ANCHOR SMOOTH and its strong beer variant ANCHOR
STRONG;
• The premium Irish ale KILKENNY;
• The Real Shandy ANGLIA;

9. BUSINESS PROFILE (CONT.)
To understand more about the product portfolio, you can refer to page 22-40 in Annual
Report 2014 or GAB official website.

10. BUSINESS PROFILE (CONT.)
Source: iCapital 7 Mar 2014

11. OWNERSHIP SUMMARY
CORPORATIONS (PRIVATE)
53%
PUBLIC AND OTHER
30%
INSTITUTIONS
16%
INDIVIDUALS/INSIDERS
1.09%

12. TOP 5 SHAREHOLDERS
GAPL PTE LTD.
82%
ABERDEEN ASSET
MANAGEMENT PLC
9%
GREAT EASTERN HOLDINGS
LIMITED, INSURANCE
INVESTMENTS
5%
JPMORGAN CHASE & CO,
PRIVATE BANKING AND
INVESTMENT BANKING
INVESTMENTS
2%
BNP PARIBAS, PRIVATE &
INVESTMENT BANKING
INVESTMENTS
2%

13. OWNERSHIP ANALYSIS
• The shareholder with the largest stake in GAB is GAPL Pte Ltd, based in Singapore,
with a 51% stake
• GAPL Pte Ltd is a joint-venture company between Heineken Asia Pacific Pte Ltd –
owned by Heineken International BV – and Diageo Plc
• GAPL is followed by Aberdeen Asset Management with a 5.26% stake, and Great
Eastern Holdings Ltd with a 3.38% stake.

14. ECONOMIC MOATS
• Cost Advantage
• GAB and CARLSBG are the only major players in Malaysia. They basically have the say
in pricing even if they are under highly regulated environment. People won't stop
drinking even if price increase
• Raw materials make up 3-6% of total cost, and the prices of wheat and malt barley
have declined by 23% and 20% respectively since Jan 2013. Hence, this should benefit
GAB and CARLSBG, although not substantially, as raw material is not a major cost
component (beer taxes make up 50-60% of total cost)
• Growing premium brand sales
• The typical 2-3% annual increase in average selling prices (ASP)

15. ECONOMIC MOATS (CONT.)
Source: AmResearch 27 Mar 2014
MLM Volumes grows in long term
even if high excise tax imposed.

16. ECONOMIC MOATS (CONT.)
• Switching Cost
• GAB and CARLSBG are the most popular brand here
• There are many other foreign brands as well
• Switching cost is not high
• Network Effect
• The more people drink beers, the higher revenue GAB is
• The rise in contrabands in the market have come to a worrying level
• Intangible Asset
• Formula of making breweries
• Network of distribution
• High customer loyalty
• Wide portfolio of brands.

17. ECONOMIC MOATS (CONT.)

18. ECONOMIC MOATS (CONT.)
• Efficient Scale
• Highly regulated
• GAB and CARLSBG are the largest permitted breweries producer in Malaysia.

19. ECONOMIC MOATS (CONT.)
48.6%
51.6%
46.2%
42.7%
50.2%
44.8%
36.9%
42.0%
45.8%
61.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
2011-06-30 2012-06-30 2013-06-30 2014-06-30 2015-06-30
ROIC & CROIC
ROIC % CROIC %
In the past 5-10 years, GAB managed to maintain more than 38% of ROIC and more than 30% of
CROIC. By MorningStar’s definition, GAB has a very wide economic moats.

20. PROFITABILITY
16.5%
17.6% 18.2%
19.7% 20.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2011-06-30 2012-06-30 2013-06-30 2014-06-30 2015-06-30
EBITA EBITA Margin %

21. PROFITABILITY (CONT.)
• In the past 5 years, even if GAB facing challenges in market and economy, GAB’s
EBITA has been increased from RM246.2m (FY11) to RM352.6m (FY15)
• GAB’s latest EBITA margin is 20.2%. By Moody’s benchmark, its EBITA margin can be
rated as Ba

22. LEVERAGE & COVERAGE
0.63 x
0.45 x 0.43 x
0.19 x
0.00 x
0.10 x
0.20 x
0.30 x
0.40 x
0.50 x
0.60 x
0.70 x
2012-06-30 2013-06-30 2014-06-30 2015-06-30
Debt / EBITDA By Moody’s benchmark, GAB’s
leverage is rated as Aaa.

23. LEVERAGE & COVERAGE (CONT.)
62.17 x
42.11 x
36.85 x
53.28 x
0.00 x
10.00 x
20.00 x
30.00 x
40.00 x
50.00 x
60.00 x
70.00 x
2012-06-30 2013-06-30 2014-06-30 2015-06-30
Coverage
EBIT/Interest
By Moody’s benchmark, GAB’s
coverage is rated as Aaa.

24. LIQUIDITY
0
10
20
30
40
50
60
70
2011-06-30 2012-06-30 2013-06-30 2014-06-30 2015-06-30
Cash Conversion Cycle
Cash Conversion Cycle Days In Inventory Days In Receivables Days Payable Outstanding

25. GROWTH DRIVERS
• 25 Aug 2014 - GAB's focus on FY15 would be on better cost management by
enhancing its efficiency and capability, while the product strategy would see better
innovation with more quality new addition to its product portfolio
• 5 Feb 2015 – GAB announced the addition of a new super premium brand – Kirin
Ichiban – to its portfolio. This follows the group's signing of a 5-year partnership
deal with Kirin Brewery which is under the purview of Kirin Holdings Co., Japan's
biggest beverage maker
• 20 Jan 2016 – 12 months business transformation programme aimed to increase
operational efficiencies across GAB’s entire value chain

26. GROWTH DRIVERS (CONT.)
• 20 Jan 2016 – New additions in portfolio

27. ISSUES/RISKS/CHALLENGES
• Highly regulated industry
• Higher than expected raw material prices
• Lower-than-expected total industry volume (TIV)
• Continuous decline in market share
• Small presence in the super premium segment
• GST implementation, the government's plans to rationalize subsidies and inflation
may reduce beer consumption, and will curb Malt Liquor Market (MLM) volume
growth.

28. ISSUES/RISKS/CHALLENGES (CONT.)
• The other threat is coming from the newer premium brands under Carlsberg's
portfolio. As consumers wish to taste new brands, Asahi Super Dry and Kronenbourg
have given them the opportunity to explore. These premium brands would go head
on with GAB's Heineken
• Competition will remain intense going forward as Carlsberg has also been investing
heavily in A&P in the past few months. To remain competitive, GAB will continue to
invest in brand line extension. The company will launch several new brands in FY14,
especially in the super premium and premium beer categories
• Contrabands – a rising concern
• Muted by duty hike.

29. ISSUES/RISKS/CHALLENGES (CONT.)
• 7 Mar 2014 - A beer brand that could make a bigger threat to GAB's brands is the
Tsingtao beer. The Chinese based company, Tsingtao Brewery Co Ltd, has set up its
first overseas plant in Bangkok, Thailand as a significant step towards globalisation
for its brand
• Contrabands – a rising concern
• Muted by duty hike
• Competition from cheap foreign beers.

30. CONTINGENT LIABILITIES
• 3 Sep 2015 – GAB received bills of demand dated 28 August 2015 from the customs
demanding payment of additional excise duties and sales tax, totaling RM56.3
million
• RM34,166,098.81 claimed under the Excise Act 1976, for the period of 28 Aug 2012 to 31
Oct 2013
• RM22,159,456.40 claimed under the Sales Tax Act 1972, for the period of 1 Jul 2012 to
31 Oct 2013

31. SHAREHOLDER RETURN
Time Frame Date Bought at Original
Value
Dividend
Received
Unrealized
Gain/Loss
Current
Return
CAGR %
3-Y 2 Nov 2012 19.48 19,480 1,730 3,500 24,710 8.3%
5-Y 2 Nov 2010 11.24 11,240 2,780 11,740 25,760 18%
10-Y 2 Nov 2005 8.8 8,800 5,130 14,180 28,110 12.3%
Assumptions:
1. Commission paid is ignored in this simulation
2. The current price is 22.90 (as of the time of writing)
3. Unit purchased is 1,000.

32. CHANGE IN FINANCIAL YEAR END
• Old finance year end: 30 Jun 2016
• New finance year end: 31 Dec 2016
http://www.bursamalaysia.com/market/listed-companies/company-
announcements/4930477

33. CHANGE IN OWNERSHIP
STRUCTURE
• 7 Oct 2015 – HEINEKEN acquired Diageo’s shares and is now the major shareholder
of GAB
• Business as usual for GAB as Heineken has been part of GAB family for more than 50
years now
• GAB will benefit even more from access to HEINEKEN’s international brand portfolio,
best practices, systems and processes
• HEINEKEN and Diageo are pursuing a long-term relationship.

34. GOING FORWARD
• For FY16, it will be challenging for GAB to pass on large price increases to
consumers in view of
• The softer environment
• Anti-profiteering act which prohibits price increases if it increases profitability
excessively.
• I will continue to hold and accumulate GAB in the future.