GAB/Carlsberg

Past week rebound of its share price were riding on improved sentiment. But observers believe this could be just a short lived rebound. The fundamentals did not change and remain pessimistic on the stocks.

The concerned are about the year on year figures and not the quarter on quarter results. The seasonal pickup on the sales of the brewers has been factored in.

The anticipated slowdown on consumer spending as a result of government’s subsidy rationalization programme does not make both brewers interesting choices for investors.

To recap, the continuous fall of GAB’s share price was attributed to the uncertainties of the market since mid 2013. Carlsberg has also experienced the fall.

In the near term there is no catalyst for GAB to rebound. There share prices have been falling even without the hike in excise duty.

The fact that both brewers’ sales and volumes shrank in the past two quarters prior to 1QFY2014 coupled with the weaker CSI indicate that spending in beer is not likely to grow.

Nonetheless, the depressed share price would help to lift dividend yield. The near term catalyst for GAB will be the valuation of its dividend yield.