Can Kirin Brewery Go Higher or Is Its Run Over? (KNBWY)

Jul. 7.06 | About: Kirin Holdings (KNBWY)

Shares of Kirin Brewery (OTCPK:KNBWY) (Tokyo: 2503) have had a nice run gaining over 70% in the past year. Japan's second largest brewery is having a strong first half and is closing the market share gap with larger rival Asahi Breweries (Tokyo: 2502). The Nikkei Shimbun reported earlier today that operating profit in the first half looks as if it will increase by 17% y-o-y. There's also speculation that if Kirin keeps up its pace through August that it could upward revise its full year forecast.

Despite the positive report by the Nikkei Shimbun, Kirin's shares ended lower by .22% at 1,806 yen ($15.68) after trading up about 0.8% in the morning session. Monthly data releases by Kirin and difficulties experienced by rival Asahi in segments where Kirin has excelled have resulted in higher expectations and thus improved sales and operating margin are mostly priced in its shares. Kirin is set to report first half earnings August 10th and per Reuters' inquiry Kirin declined to confirm the Nikkei Shimbun's numbers saying however, its results were not likely to be too far from the reported figures. (Reuters)

It doesn't seem to me that Kirin can trade any higher than 1,900 yen in the short-term, giving it about 5% upside. At a minimum a confirmation of its performance with its earnings release or a report of further out performance will be necessary to get this stock higher. A revised full year forecast in August is essential if its uptrend is to continue on through '06. A chart of its ordinary shares looks as if its forming a double top and although I'm no chartist it looks like there's strong resistance.

The Japanese beer market is very competitive and who knows what Asahi might attempt to protect its 5-year running spot at number one. Kirin has already announced its intention to wholly acquire Kirin Beverage Corp (Tokyo: 2595) and to explore growth opportunities in the Asia region. This is a must since Kirin could enjoy faster growth from non-alcoholic beverages domestically and expand its scale regionally.

A good summary of the Nikkei article can be read on Reuters.com.

Kirin Brewery (OTCPK:KNBWY) 1-year chart: