• 1Q21 core net profit of RM73.5m (+29.1% yoy) came in above our expectations on better-than-expected operating margin for the quarter
• Sequential sales were higher by 6% qoq driven by festivals such as Chinese New Year and St. Patrick’s day celebration
• We raise our 2021-23E earnings estimates by 0.4-3.5% and roll forward our base year to 2022 to arrive at a higher DCF-derived TP of RM26. Maintain HOLD

1Q21 Core Net Profit at RM73.5m (+29.1% Yoy)

Heineken Malaysia (HEIM) started off 2021 with a commendable set of results. Revenue grew by 6.2% yoy due to the gradual adaptation of businesses and consumers towards the pandemic and successful execution of promotional activities. Besides, the relative relaxation of the nationwide movement control order (MCO2.0 vs MCO1.0) also contributed to the higher sales compared to March 2020, when the group had to fully suspend its operations. Meanwhile, EBITDA margin improved by 3.1ppt yoy to 20.9% from better cost management and deferment of commercial costs. Excluding one-offs, core net profit came in at RM73.5m (+29.1% yoy), accounting for 32% of our previous full-year forecast and above our expectations due to a better-than-expected operating margin for the quarter.

Sequentially Stronger With Festive Sales

Sequentially, the group revenue increased 5.5% qoq boosted by festivals such as Chinese New Year and St. Patrick’s day celebration. Besides, the easing of dine-in restrictions and declining Covid-19 infection numbers also contributed to HEIM’s stronger qoq sales. Meanwhile, 1Q21 PBT increased by 43.4% qoq from higher revenue contribution, effective cost management and absence of RM14m one-off provision for organizational restructuring cost in 4Q20. No dividend was declared during the quarter.

Maintain HOLD

We raise our 2021-23E earnings estimates by 0.4-3.5% to factor in a slightly higher EBITDA margin of 18.9% for 2021E (from 18.4% previously) post the strong results. We also roll forward our base year to 2022E, resulting in a higher DCF derived TP of RM26. Maintain a HOLD call on Heineken Malaysia as we remain cautious on the stock’s near term upside at this juncture with the renewed MCO3.0 and the rising Covid-19 cases Malaysia. Up/downside risks: (i) earlier/later-than-expected containment of Covid-19 and (ii) sharp decline/spike in raw-material costs, and 3) regulatory risks which could dampen sales volumes

Source: Affin Hwang Research - 21 May 2021