Dividend Yield Stocks (Part 3) – Carlsberg Brewery

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Dec 01 2008
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We’re not going to debate or argue whether the time is ripe to scoop some stocks at the current level because obviously different people have different risk appetite. Fund managers couldn’t help but to fill their portfolios with some battered shares with only one reason – they can’t afford to miss the boat in case miracles happen. Furthermore it was not their own money that they’re betting. Having said that sadly some fund managers such as those who were investing for their clients in the name of unit trusts are still licking their wounds, not to mention the fierce calls received from clients demanding explanations.

Amanah Saham – a Ponzi Scheme?

During such difficult time rumors, speculations and theories begun to fly around especially concerning huge funds managers. The latest being the reason why Amanah Saham Nasional Berhad is offering additional new units of 1 billion Amanah Saham Wawasan 2020 (ASW 2020). It was no-brainer that people flocked to ASW and similar scheme because of its high dividend rate. The naughty rumors were that Amanah Saham is making great losses with the current global economic havoc and this latest 1 billion new units to be offered to public was to capture new fresh money to pay dividends for old subscribers, hence the “Ponzi Scheme”. As long as investors do not withdraw all their investment plus the dividend the Ponzi-Scheme will not burst, if indeed ASW is one of such scheme.

Amanah Saham Wawasan Ponzi Scheme?Started by Italian immigrant Charles Ponzi, it’s hard to imagine and believe that such Amanah Saham programs could fall under such scheme. Malaysian government would not let such high-profile investment initiatives to go bust. Even if it shares some similarities or characteristic of “Ponzi Scheme” the fact that all the investors will not get panicked and start withdrawing at the same time somehow ensures the investment should be safe (I hope). Although it would be fun to see just how much monies are left in Amanah Saham’s vault, let’s don’t talk into one because the last thing we want is a new scandal or financial crisis huge enough to bring down the nation.

Dividend Stocks Continue

It’s been a while since I last wrote about dividend stocks. Regardless whether you have already entered the stock market and are punching your head now or you’re grinning from ear to ear watching the stocks continue to slide because you’re still holding to your bullets, you can’t ignore to have dividend stocks in your portfolio. So if you’ve bought some stocks and you’re recording paper-loss give yourself a round of applause if your stocks yield good dividends. Hey, that’s how you calm and motivate yourself instead of thinking of jumping from the 17th floor right? I’m still patiently waiting but my sisters are already fuming because whenever they asked me when to jump I said “just wait, have patient”.

Carlsberg ProductsBefore I continue l would like to clarify that the following stock is not for everyone especially to Muslim readers because it’s a non-halal stock. In fact the previous write-up on Dividend Yield Stocks (Part 1) – Berjaya Sports Toto was a non-halal stock as well but I didn’t declare (kinda forgotten) it since I noticed there’re many Muslim friends who are still flocking to the 4D-outlets as if they were buying Starbucks Latte despite the warning sign displayed. So, if you’re a Muslim reader, do not proceed to read further.

Carlsberg – Safe Stock Vulnerable to Duties & Taxes

Carlsberg Brewery Malaysia Berhad (KLSE: CARLSBG, stock-code 2836) is kind of unique in the sense that the Denmark parent company Carlsberg Brewery A/S is holding the controlling 51% stake via UOBM Nominees (Asing) Sdn Bhd. Hence you won’t see fierce volatility in the stock price even during the worst time – swing traders hate this stock. Carlsberg has only one competitor – Guinness Anchor Berhad (KLSE: GUINESS, stock-code 3255), another cool dividend paying stock but that’s another story for another day. No doubt Carlsberg and Guinness Anchor are sin stocks but they’re safe bets for obvious reason. Just like its “sin brother” tobacco stocks (another addictive product) it’s hard to ask the alcohol drinkers to quit drinking, let alone the hardcore alcoholic (they are not called alcoholic for no apparent reason in the first place).

CarlsbergSuch stocks do not really have to worry about losing consumers since there would be guaranteed new pool of youngsters born every year who would show off their drinking skills to replenish those “older hippies” who may drink lesser as their age catching up. Believe me, when you’re young and clubbing is your second nature of entertainment the beers’ prices are the last thing that would concern you. The major challenge that stubbornly attach like leeches to the alcohol industry in Malaysia is the forever rising government duties and taxes.

Besides RM7.40 per liter excise duty there is also so-called “Ad Valorem” duty of 15% on ex-brewery (introduced in 2005), not to mention sales tax of about 5 percent. The excise duty per liter has increased by a whopping 169% since 1991 from RM2.75 to current RM7.40 a liter. If the number was not enough to make you fell off the chair, maybe the fact that excise duty and Ad Valorem formed the biggest cost of Carlsberg operation – it’s a whopping 47.2%, more than double of sales, distribution and administration cost (20.8%).

Carlsberg Fundamentals

If your objective is solely to put your money into an instrument that can generate annual return higher than fixed-deposit then you might want to seriously consider Carlsberg. However you should not hope for a sudden jump in net profit since any bullish in business forecast would be followed by higher excise duty or other sin taxes (yes, the government knows what they’re doing). As much as I would like to use the word “saturated”, the better word could be “market maturity”.

Carlsberg RevenueCarlsberg Net Profit Excise DutyCarlsberg Net DividendCarlsberg Net EPSAs of Dec 2007 Carlsberg share in the local beer market was estimated to be around 45%, second to Guinness Anchor Berhad. At this moment the newcomer, Napex Corporation, owned by Teluk Intan businessmen Kiew Yong Seang and Ng Siew Cheng had captured only about 1 percent of local beer market since it started operation in 2007. So there’s little to worry about this new kid, for the time being. When you talk about Carlsberg you can’t run away from comparing it with another banking giant, Public Bank Berhad (KLSE: PBBANK, stock-code 1295).

Carlsberg Return on Investment ROIIf somehow you inherited 1,000 Carlsberg shares in 1971 and you had keep it under your pillow all these years till now, your initial 1,000 shares would have ballooned to 33,750 shares assuming you’ve subscribed to the rights issue in 1973. Long story short, the initial investment of RM1,500 would grow to RM118,125 based on today’s closing price of RM3.50 a share excluding the RM179,569 in cumulative gross dividend received since 1971 to 2007. Technically you are a millionaire if you have 4,000 shares back in 1971.

Carlsberg Technical Analysis – on freefall

Carlsberg stock chartThere’s nothing much to say when you look at the stock-chart except that it’s on a free-fall, thanks to the current economic uncertainty. Forget about support or resistance level but then which stocks are not affected anyway? Assuming the company will maintain net EPS at RM0.26 per share, the stock is currently trading at 13.46 times. But the greedy FinanceTwitter wants a single digit P/E before slowly scoop the stock. Please do not follow me because I’m a stingy rat who would pay only peanuts to panicked sellers. Anyway, please don’t drink and drive at the same time.

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