BofA: Cuts Budweiser APAC target price to HK$7.3, quarterly results miss but dividend yield remains attractive

BofA Securities issued a research report stating that Budweiser APAC's third-quarter revenue was weak but broadly in line with the market's lower expectations, with revenue, EBITDA excluding exchange rate factors, net profit and normalized net profit falling 8%, 23%, 50% and 28% year-on-year respectively, which is believed to have been dragged down by continued weakness in the Chinese market and rising costs in other regions. Considering that the Chinese market remained under pressure in October this year and that cost pressures are expected to increase further next year, the bank lowered its EBITDA forecasts for this year and next by 10% and 14%, and its normalized earnings per share forecasts by 8% and 20%. The bank reiterated its "Buy" rating on the stock and cut its target price by 15% from HK$8.5 to HK$7.3. Budweiser APAC's share price has fallen about 20% year-to-date, compared with a roughly 10% decline in the Hang Seng Index over the same period. The bank believes the earnings weakness has largely been reflected in the share price performance, and is optimistic that the group can still offer a dividend yield of about 6%, supported by a strong balance sheet.