Heineken ends financial year 2018 within expectations
KUCHING: Heineken Malaysia Bhd’s (Heineken) financial year 2018 (FY18) net profit of RM282.5 million has come within expectations as it met consensus full-year estimates at 102 per cent.
In a results note, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) saw that Heineken’s stronger turnover of RM2.03 billion which saw an eight per cent increase year on year (yo-y) was due to the higher sales volume in the off-trade segment which is likely derived from less premium brands.
The increase in volume could also be due to the forward buying pre-price hikes in 2018 – once in April 2018 when the GST exemption began and the second time in September 2018 when the SST was beginning to be reinstated.
Overall, the year ended on a good note as Heineken managed to hold onto its market-leading position.
“Allowing them to stay relevant amidst potential changes in consumer behaviour,” added the research arm.
Post announcement of Heineken’s full year results, Kenanga Research guided in their report that they would be tweaking their FY19E net earnings by 2.3 per cent and introduce their FY20E numbers.
Looking ahead, Kenanga Research is expecting Heineken to hold its ground as market leader in the domestic scene.
“Keeping a balanced portfolio between its premium and less premium offerings, the group is positioned well to capitalise on any shifts in market appetite assuming consumers sought to down-trade to more affordable offerings.
“Additionally, this could provide the group some supports against any potential softness from the on-trade segment, which prices are increased on both sales tax and service tax.
“While the group is on guard against unfavourable movements in input costs, plans to expand its capabilities to improve overall efficiency and economies of scale could bring about savings in cost,” said the research arm.
All in, Kenanga Research is maintaining their market perform call on the stock with a higher target price of RM21.90 from RM18.60 previously.
“Due to being perceived as a resilient sector against SST price pressures, there appears to be growing market attention towards brewers.
“Additionally, Heineken still looks to command decent yields of above 4 per cent, in contrast to an average of 2 per cent amongst large cap F&B players which are also viewed as safe haven options,” justified the research arm.