Worst is over for Heineken Malaysia with easing of MCO restrictions — HLIB Research

Worst is over for Heineken Malaysia with easing of MCO restrictions — HLIB Research
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KUALA LUMPUR (Feb 19): The worst is over for Heineken Malaysia Bhd with the loosening of Movement Control Order (MCO) rules, but with certain drinking revenues such as nightclubs and karaoke venues still shut, volumes are expected to be below its financial year ended Dec 31, 2019 (FY19) levels for the foreseeable future.

In a note today, Hong Leong Investment Bank (HLIB) Research stated that Heineken Malaysia had developed an in-house e-commerce platform "Drinkies", and that in FY20, order volumes through this platform increased 93% while sales grew by 208%.

While it is positive on this venture in the long run, it is understood that this platform is still in its nascent stage, accounting for under 1% of total sales in FY20.

“Going forward, Heineken’s earnings will be greatly reliant on Malaysia’s ability to keep the spread of Covid-19 under control and roll out vaccines quickly, which would result in return to normal drinking behaviour,” the research house said.

On the brewer’s FY20 results, which were announced yesterday, HLIB Research said they were in line with house expectations and above consensus'.

As such, it has not changed its earnings forecasts.

The research house is forecasting a core profit after tax and minority interests (PATAMI) of RM272.3 million for FY21 and RM317.3 million for FY22.

After rolling over its valuation year, HLIB Research has raised its target price to RM22.25, from RM20.45 previously, based on an unchanged discounted cashflow methodology. It has maintained its "hold" call.

For FY20, the group's net profit halved to RM154 million from RM313 million posted a year earlier as the group continued to recover from the impact of the Covid-19 pandemic to its business and the industry. Revenue for the full year slid 24.13% to RM1.76 billion from RM2.32 billion a year ago, while earnings per share plunged to 51.04 sen from 103.6 sen. Total dividend for the previous financial year stood at 108 sen, compared with the 51 sen declared for FY20.

At 10:55am, Heineken Malaysia shares were up 0.69% or 16 sen at RM23.50, valuing it at RM7.1 billion. It saw 69,700 shares done.

Surin Murugiah