• Maintain BUY, with new MYR30 TP from MYR29.60, 31% upside and c.7% FY25F yield. Heineken Malaysia’s 9M24 results exceeded expectations due to better-than-expected margin and lower-than-expected effective tax rate (ETR). Current below-mean valuation is attractive in view of the steady earnings growth notwithstanding the cautious consumer sentiment. We believe this is sustainable on demand stickiness, margin uplift brought about by a premiumised product mix and price increases as well as encouraging tourist arrivals.

• 9M24 results were above expectations. Net profit of MYR326m (+13% YoY) accounted for 79% of both our and consensus forecasts mainly due to the better-than-expected margin and lower-than-expected ETR. Post-results, we raise FY24F-26F earnings by 6%,4% and 4%. Correspondingly, our DDMderived TP rises to MYR30 (inclusive of a 6% ESG premium), which implies 20x FY25F P/E. This is at a premium over peer Carlsberg Brewery (CAB MK, BUY, TP: MYR23.1) to account for HEIM’s market leadership.

• Results review. YoY, 9M24 revenue rose 3% to MYR2bn due to the longer selling period for Lunar New Year and price increases effective Apr 2024. Meanwhile, 9M24 operating profit grew at a faster pace of 9% to MYR417m, with margin expanding by 1.1ppt which we believe was driven by a more favourable product mix, price increases and effective cost management. In addition, 9M24 ETR was lower at 20.5% thanks to the recognition of reinvestment allowance tax credits in 3Q24 and led to a 13% jump in net profit to MYR2326m. QoQ, 3Q24 revenue was 10% higher at MYR619m as 2Q24 was a low base affected by a pre-price increase frontloading. Together with the abovementioned tax savings, 3Q24 net profit surged 23% to MYR112m.

• Outlook.We expect 4Q24F sales to be boosted by the earlier timing of Lunar New Year in 2025 (29 Jan; 2024: 11 Feb) whilst management has also observed a gradual recovery in consumer sentiment. Beyond the immediate term, whilst volume growth is not expected to be exciting considering the cautious consumer sentiment on the back of heightened inflationary pressures, the premiumisation strategy and margin uplift from price increases should continue to drive commendable earnings growth. In addition, we expect HEIMto remain focused on driving operational efficiency and stimulate consumer spending with strategic marketing engagements as well as new product launches.

• Risks to our recommendation include unfavourable regulatory changes and major loss of market shares.

Source: RHB Securities Research - 13 Nov 2024