Friday 29 Mar 2024
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KUALA LUMPUR (Dec 16): Carlsberg Brewery Malaysia Bhd and Heineken Malaysia Bhd emerged among the top gainers on Bursa Malaysia as investors bet on their recovery.

Carlsberg, the third top gainer this morning, climbed as high as 96 sen or 4% to RM24.92. At 10.06am, the counter had pared some gains at RM24.40, still up by 44 sen or 1.84%.

Heinekan also rose as much as 60 sen or 2.62% to RM23.48, making it the fourth top gainer. At 10.07am, the counter had pared some gains at RM23.28, still higher by 40 sen or 1.75%.

CGS-CIMB Research analyst Walter Aw said in a note today it had upgraded the brewery sector to "neutral" from an "underweight" rating previously, with him believing the worst is over for the sector.

“We have 'hold' calls for both Heineken and Carlsberg, but our preferred pick of the two is Carlsberg given its cheaper valuations and higher dividend yields,

“In our view, sector valuations largely account for both the current weak operating environment and recovery of the malt liquor market (MLM),” he said.

According to Aw, the brewery sector is currently trading at 21.8 times one-year forward price-earnings ratio (PER), in line with the sector’s five-year historical mean of 22.4 times.

“While we understand current consumer sentiment is subdued and the tough business environment may lead to closures of certain on-trade sales locations, we expect valuations to be supported by an expected recovery in MLM volumes in 2021, as well as the sector’s solid FY20 to FY22 [estimated] dividend yields of 2.5% to 4.7%,” he said.

He expects MLM volumes to recover in 2021, backed by better consumer sentiment,  reopening of on-trade sale points and higher tourist arrivals.

“In 2021, we expect MLM volumes to recover by 10% to 15% from a low-base effect,” he said.

He added that going forward, brewers should record stronger earnings, thanks to higher MLM volumes, a more profitable sales mix and better economies of scale.

Edited ByLam Jian Wyn
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