Review

• Heineken Malaysia Berhad’s (HEIM) FY23 core earnings of RM386.8mn (- 6.3% YoY) met our and consensus expectations at 101% and 100%, respectively.

• In 4QFY23, HEIM experienced a 5.3% YoY decline in core net profit to RM99.1mn in tandem with 8.0% YoY drop in revenue to RM728.6m, primarily due to lower sales volume. On QoQ basis, the revenue rose 21.5% driven by higher sales during festive seasons such as Christmas but core earnings increased by only 13.5% QoQ as higher cost was incurred to boost the Chinese New Year sales in 2024.

• In FY23, revenue stood at RM2.6bn (-7.6% YoY). Core PBT declined 14.1% YoY due the market corrections following the high base effect in FY22. Despite, core earnings only decreased by 6.3% YoY, mainly driven by the absence of prosperity tax in FY23.

• The group declared a final dividend of 88sen/share (4QFY22: 98sen/share) bringing the YTD dividend amounted to 128sen/share (FY22: 138sen/share).

Impact

• Maintain our earnings projection and introduce our FY26 core net profit of RM449.1mn.

Outlook

• We anticipate that HEIM would maintain a strong revenue in 1QFY24, bolstered by strong demand during the Lunar Chinese New Year. Additionally, Tourism Malaysia aims to attract 27.3 million foreign travellers in 2024, which we believe will drive the growth in beer consumption in the out-of-home channel.

Valuation

• Reiterate Buy on Heineken with a target price of RM28.60/share based on DCF valuation (k: 7.7%, g: 3.0%).

Source: TA Research - 28 Feb 2024