KUALA LUMPUR (Feb 17): Heineken Malaysia Bhd has emerged as the top gainer at mid-morning on Thursday (Feb 17) after its net profit for the fourth quarter ended Dec 31, 2021 (4QFY21) surged 76.93% to RM95.85 million from RM54.17 million a year ago, and it proposed a final dividend of 66 sen per share.
The counter rose as much as RM1.72 or 8.45% to RM22.08. At 10.01am, it settled at RM22.04, still up RM1.68 or 8.25%.
Reviewing the brewer's performance, analysts said they expect the group’s performance to improve moving forward.
Affin Hwang Investment Bank analyst Damia Othman said in a note that Heineken Malaysia's core earnings of RM246 million for the financial year ended Dec 31, 2021 (FY21) came in above her and consensus estimates.
According to Damia, this was due to higher-than-expected sales and lower-than-expected operating costs.
She also said its 4QFY21 results were boosted by higher sales from effective marketing activities and better cost control in right-sizing the organisation.
“We increase our earnings forecasts by 8% and 4.4% for FY22 (RM274.8 million) and FY23 (RM314.5 million) respectively after imputing higher sales assumptions,” she said.
She maintained "buy" on Heineken Malaysia and revised up its target price (TP) to RM26.90 from RM26.00.
Further catalysts, according to Damia, include the reopening of international borders and potential reopening of pubs and nightclubs.
Meanwhile, Kenanga Research analyst Ahmad Ramzani Ramli said Heineken Malaysia's FY21 results came broadly within expectations and that he is expecting stronger performance ahead given the reopening of the economy.
“Post results, we bumped our FY22 revenue by 5.6% to RM2.2 billion and revised higher the core net profit in tandem by 5.9% to RM286 million on increased demand for alcoholic beverages,” he said.
However, he noted that the group is expected to incur higher cost of raw materials as a result of rising inflation and disruption in the supply chain.
“Taking into account the abovementioned, coupled with the surge in the Omicron variant, the group could mitigate these by further streamlining their operations,” he said.
In addition, he believes that Heineken Malaysia would be able to leverage its attractive product mix and further expand its customer base.
“Finally, as the government reaches its targeted vaccination rates, entertainment outlets could be given the green light to operate again as usual at pre-pandemic hours — this potentially being a major driver for increased beer sales,” he said.
Nevertheless, he maintains "market perform" on Heineken Malaysia with a lower TP of RM20.50 (from RM23.60).
“Our TP is based on its five-year mean price-to-earnings ratio of 21.7 times (previously 26 times) to reflect elevated input cost — crimping earnings,” he said.
Hong Leong Investment Bank analyst Sophie Chua Siu Li, on the other hand, said Heineken Malaysia’s FY21 core net profit of RM245.7 million came in within her estimate at 105% but was above consensus at 108%.
According to her, the commendable set of results was due to Heineken Malaysia’s efforts in right-sizing the organisation and cost base, while at the same time, pushing through effective commercial and marketing campaigns to boost top line recovery.
“While we are encouraged by the good set of results delivered by Heineken Malaysia in FY21, we highlight that its performance has yet to return to pre-Covid levels.
“We expect recovery to continue, despite the recent surge in cases, given that the government has indicated that there will be no more lockdowns going forward,” Chua said.
She said the rate of recovery would very much depend on consumers’ behaviour, as they adapt to a new normal and potentially avoid large events and mass gatherings for the time being.
In light of the current inflationary pressures, she said the management would also be keeping a close eye on input costs, and did not rule out further price adjustments in the future to compensate higher costs, if need be.
Chua made no changes to her earnings forecasts, and maintained a “hold” rating on Heineken Malaysia with an unchanged TP of RM22.50.