East African Breweries Limited (EABL KN) held its quarterly analyst briefing on 19 June 2013. The conference call did not provide information we hadn’t factored in our FY13 estimates, and as a result believe the brewer is in line to deliver an EPS of 10.79 (-19.2%y/y). We maintain a SELL recommendation on a fair value of KES 211.70 for the brewer.
Management suggest FY13 results to June will deliver a reasonably robust top-line performance, we think bottom line is likely to be weak as a result of higher finance costs and the absence of the one-off gain of KES 3.6bn from the sale of its stake in Tanzania Breweries.
EABL expects Senator Keg volumes to reduce going forward as a result of the new reduced duty remission of 50% compared to 100%. The volume impact will not affect FY13 earnings as the effective date depends on the date of gazettement.
Whereas interest rates have been on a downward trend, total interest cost on the KES 19.5bn loan used to purchase a 20% stake back from SABMiller will apply for a full calendar year of 12 months rather than 7 months in the previous financial year. The loan is KES denominated, variable and priced at 364 day T Bill+1.5%.
Source: SIB