Heineken shares hit all-time high on solid earnings

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KUALA LUMPUR (Nov 29): Heineken Malaysia Bhd shares hit an all-time high this morning after the brewer posted a 31% increase in third quarter net profit to RM103.3 million from RM78.87 million a year ago.

At 11.27am, Heineken shares rose 2.32% or 60 sen to RM26.50, valuing it at RM8.01 billion.

The improved quarterly net profit was due to higher revenue and improved cost efficiency, as well as the timing of commercial spend for new product launches executed during the quarter, the group's bourse filing showed.

Revenue for the quarter also rose 17.7% year-on-year (y-o-y) to RM602.53 million from RM512.01 million.

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 (TP) of RM28.90 (from RM26.50) and said Heineken's 3Q19 core profit after tax (PAT) of RM103.3 million (quarter-on-quarter: +57.2%, y-o-y: +31%) brought 9M19 core PAT to RM221.8 million (y-o-y: +21.5%), accounting for 72.9% and 73% of house and consensus expectations respectively.

In a note today, the research house said it deems this above expectations as the fourth quarter 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 (discounted cash flow) valuation methodology (WACC [weighted average cost of capital]: 7.5%, TG: 2.5%). Maintain Buy call," it said.