HLIB Research keeps ‘buy’ stance on Heineken
KUALA LUMPUR: Heineken Malaysia Bhd’s first quarter core net profit of RM113.4 million is above Hong Leong Investment Bank Bhd (HLIB Research) and consensus projections at 38 and 41 per cent, respectively.
The research firm said this was due to higher-than-expected revenue and lower-than-expected operating costs.
It said while Heineken’s revenue remained rather flat quarter-on-quarter, its core net profit registered an 18 per cent growth owing to margin expansion.
“In our view, the price adjustment in the fourth quarter of last year contributed to the better margin, with the full threemonth boost of the price hike reflected in the first quarter results,” it said in a note yesterday.
HLIB Research said following Malaysia’s transition into the Covid-19 endemic phase, brewers such as Heineken would benefit from the lifting of restrictions.
They include longer operating hours for eateries and entertainment outlets, more mass gatherings, larger turnout for events and higher tourist arrivals.
“In our view, the reopening of nightclubs starting May 15 augurs well for Heineken. We are not overly concerned on the rising input costs (higher barley and aluminium prices), as we believe that brewers will have the ability to raise prices if required, considering the relatively inelastic demand for beer.
“Better operating leverage (due to the absence of forced brewery closures) and ‘premiumisation push’ should also help to protect any margin erosion arising from cost inflation,” it added.
HLIB Research has raised Heineken’s earnings forecasts for financial years 2022 and 2023 by eight to 16 per cent.
It has also maintained its “buy” call on Heineken with a higher target price of RM28.87 from RM24.92 previously.