This article first appeared in The Edge Financial Daily on August 30, 2018

Heineken Malaysia Bhd
(Aug 29, RM22.16)
Maintain hold with unchanged target price of RM23.11: Excluding provision and write-off of inventories amounting to RM4.8 million, Heineken’s core profit of RM108.5 million for the first half ended June 30 (1HFY18) came in at 37.7% and 36.6% of ours and consensus full-year estimates respectively.

We consider the results to be within expectations as we expect the group’s FY18 earnings to be back-end loaded due to the tax holiday period between June 1 and tomorrow, a boost in sales during the Fifa World Cup in June and July 2018, and typically strong earnings season during year-end festivals.

The group declared a first interim dividend of 40 sen per share, maintaining the same amount declared in the corresponding period last year.

Year-on-year, 1HFY18 core profit was 1.9% lower at RM108.5 million despite revenue growing 5.9% to RM855.4 million. This was mainly due to higher commercial spend during the festive period in the first quarter ended March 31 (1QFY18) and the timing difference of commercial spend for the football campaign in 2QFY18. Meanwhile, the improvement in revenue was mainly attributed to higher sales volume during the festive period and trade loading prior to the price adjustment in April 2018.

Quarter-on-quarter, 2QFY18 core profit increased 22.5% to RM59.7 million, despite revenue being 2.8% lower at RM421.6 million. This was mainly attributed to higher sales during the festive period a quarter ago.

The management indicates that the 10% sales and services tax (SST) will be passed on to the consumers through price adjustment effective from Sept 17, 2018.  — TA Securities, Aug 29