KUALA LUMPUR (July 19): Carlsberg Brewery Malaysia Bhd and Heineken Malaysia Bhd emerged among the top gainers on Bursa Malaysia in the morning session today as investors bet on their resurgent recovery.
Carlsberg opened at RM21.20, reaching an intraday high of RM21.66 before settling at RM21.60, making it the second top gainer on Bursa at the 12.30pm break. At RM21.60, the group was valued at RM6.6 billion.
Heineken also rose 22 sen or 1.01% this morning to settle at RM22, with a market value of RM6.65 billion. Heineken — the fifth top gainer so far today — saw a trading volume of 85,900 shares.
In a July 7 note, UOB Kay Hian said that Carlsberg’s distribution trade channels were sufficiently stocked despite the suspension of operations running into the sixth week then.
“But should operations continue to be suspended beyond July, we estimate a 4% impact on 2021 earnings for every week it (the suspension) is being extended. However, we think investors would be forward-looking as Carlsberg remains poised for a resurgent recovery,” it added.
The research house maintained its "buy" call on Carlsberg, with a target price (TP) of RM25.
CGS-CIMB Research, meanwhile, said in a report on June 2 that it believes both brewers will still record strong year-on-year (y-o-y) results for the financial year ending Dec 31, 2021 (FY21) on the back of a gradual recovery in sales volume.
“This is premised on higher finished goods inventories held by both brewers in the event of another lockdown, the availability of various off-trade sales points, including e-commerce to cater for consumers’ off-trade needs, and upcoming global sporting events, such as Euro 2020. Note that these major sporting events are key drivers of beer sales,” said its analyst Walter Aw in the report.
CGS-CIMB retained its "neutral" call on the brewery sector. The research house has a "hold" recommendation for both Carlsberg and Heineken, with TPs of RM23 and RM24.20 respectively.
“Despite the sector’s weak near-term outlook amid Covid-19, we think valuations will be supported by the defensive nature of the brewers’ business (inelastic beer demand), the captive market in Malaysia (only two licensed breweries in Malaysia), and the brewery sector’s 29.5% discount to Malaysia’s overall consumer sector’s current CY22F (calendar year 2022 forecast) weighted average P/E (price-earnings) of 35 times,” Aw added.