Heineken rises 2.24% on firm 3Q earnings

HLIB Research raises target price for Heineken to RM28.90

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KUALA LUMPUR (Nov 29): Shares in Heineken Malaysia Bhd rose 2.24% this morning after the brewer posted a 31% increase in net profit to RM103.3 million for the third quarter ended Sept 30, 2019 (3QFY19) from RM78.87 million a year ago, on higher revenue and improved cost efficiency, as well as the timing of commercial spend for new product launches executed during the quarter.

At 9.05am, Heineken rose 58 sen to RM26.48, valuing it at RM8 billion.

Revenue for the quarter also rose 17.7% to RM602.53 million from RM512.01 million a year ago.

Net profit for the cumulative nine months (9MFY19) was up 21.5% to RM221.8 million from RM182.52 million a year ago, while revenue rose 19.9% to RM1.64 billion from RM1.37 billion.

Meanwhile, Hong Leong IB Research maintained its “Buy” rating on Heineken at RM25.90 with a higher target price of RM28.90 (from RM26.50) and said Heineken’s 3Q19 core profit after tax (PAT) of RM103.3 million (QoQ: +57.2%, YoY: +31.0%) brought 9M19 core PAT to RM221.8 million (YoY: +21.5%), accounting for 72.9% and 73.0% of house and consensus expectations.

In a note today, the research house said it deems this above expectations as 4Q is a seasonally strong quarter.

It said the better-than-expected earnings were due to better-than-expected sales volumes and improved cost efficiencies.

“We raise our FY19/20/21 earnings by 4.8%/9.0%/10.4% to account for better sales volumes going forward.

“After our earnings adjustment, our TP rises from RM26.50 to RM28.90 pegged to an unchanged DCF valuation methodology (WACC: 7.5%,TG: 2.5%). Maintain Buy call,” it said.