Highlights

Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Fri, 27 Mar 2020, 9:21 AM

 

Heineken Malaysia Berhad - Covid-19 Clouds Near-term Prospect

Author:   |    Publish date:


FY19 CNP of RM313.0m (+11%) missed our expectation. While we are of the view that the group’s sales growth will be sustained by its sturdy core brands and new launches moving forward, we are cautious over the Covid-19 outbreak which has dampened tourism and leisure activities. Following the recent stock price rally which bucked the falling trend of many Covid-19 affected consumer/hospitality related stocks, we now close our position and downgrade the stock to MARKET PERFORM with a revised TP of RM28.90.

Missed expectations. FY19 net profit of RM313.0m came in below expectations at 91% and 96% of our and consensus’ forecasts, respectively. We believe the shortfall is largely attributed to weakerthan-expected sales volume coupled with higher-than-expected marketing spends in 4QFY19. Nonetheless, a declared dividend of 66.0 sen, (full-year pay-out: 108.0 sen) exceeded our FY19 expectation of 95.0 sen.

More commercial spending. YoY, FY19 earnings rose 11%, largely riding on the back of robust sales growth (+14%) across all brands and new product launches (i.e. Heineken 0.0 and Tiger Crystal). However, EBIT margin contracted by 1.0ppt, which we believe was due to higher commercial spending. For the individual quarter of 4QFY19, net profit of RM91.2m registered a 9% drop YoY as higher revenue (+3%) was overshadowed by higher marketing spends for new product launches as well as Chinese New Year CNY) promotions. This led to a 4.2ppt contraction in EBIT margin to 17.8%.

QoQ, while sales growth continued to record a commendable 13% growth on sustained momentum for its core brands and new launches, higher marketing activations for CNY promos dragged net profit down by 12%. Similarly, this pressured a 4.9ppt contraction in EBIT margin.

Possible hit from Covid-19? Recap that due to rising costs, the group has announced price hikes of 5-7% for its portfolio of products effective March 2020. Nonetheless, we believe that this will not be overly disruptive to overall demand as beer demand has proven to be rather inelastic, as evidenced by minimal impact observed from prior price hikes. That said, we are of the view that the group’s sales growth will be sustained by its sturdy core brands as well as exciting new launches moving forward. While the group has highlighted that the CNY buying momentum will persist into 1QFY20, we are cautious over the recent Covid-19 outbreak which has dampened tourism and leisure activities and possibly the demand for beer too.

Post-results, we nudged our FY20E earnings by 1% to account for the foresaid price hikes and higher cost assumptions while also introducing new FY21E numbers.

Downgrade to MARKET PERFORM with higher TP of RM28.90 (from RM28.60) following an earning bump with an unchanged 24.0x FY20E PER (in-line with +1SD over its 3-year mean). While we like the name for its market leader position coupled with an improving operating environment on the effective clamp down of illicit beer, we are nonetheless cautious over its near-term outlook being dampened by the Covid-19 outbreak. While we believe the impact of the outbreak will be short-lived, the recent stock price run-up which exceeded our previous TP of RM28.60, prompts us to close our position and downgrade the stock to MARKET PERFORM. Risks to our call include: (i) strongerthan-expected sales volume, and (ii) lower-than-expected operating expenses.

Source: Kenanga Research - 24 Feb 2020

Share this
Labels: HEIM

Related Stocks

Chart Stock Name Last Change Volume 
HEIM 21.92 +0.02 (0.09%) 417,200 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Perform Technical & Fundamental Analysis on Stocks
MQ Affiliate
Earn rewards by referring your friends
 
 

484  338  445  743 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 SAPNRG 0.0750.00 
 AIRASIA 0.75+0.02 
 LAMBO 0.010.00 
 EKOVEST 0.38+0.01 
 HIBISCS 0.325-0.01 
 HSI-C9J 0.205+0.015 
 ARMADA 0.1350.00 
 SANICHI 0.045+0.005 
 VELESTO 0.110.00 
 JAKS 0.73+0.01 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
2. MQ Affiliate – A smarter way to earn more rewards MQ Trader Affiliate Program
3. MQ Affiliate – How to become an effective affiliate MQ Trader Affiliate Program
4. MQ Affiliate – Upgrading to Affiliate Partner MQ Trader Affiliate Program

TOP ARTICLES

1. This stock will do VERY well in the near term as the best is yet to come! Trend Trading 2030
2. The world can learn from China how to overcome Covid - Koon Yew Yin Koon Yew Yin's Blog
3. Corona Virus to End May 29th; Economy slowdown to End Nov 2021, Says Indian Boy Who Correctly Predicted It's Start, 8 Months Ago Good Articles to Share
4. 几乎一面倒唱衰股市的巨大声浪中,反抗直觉,想战胜人性,逆市操作,实实是一件不好受的苦差。 ABMB 银行为例,有很多股价已跌至十多年来最低,回顾1998,2009年谷底后猛回弹。
5. Genting Bhd - It’s Really Cheap; BUY Kenanga Research & Investment
6. MYEG - UPGRADED TO OUTPERFORM BY CREDIT SUISSE (27 MARCH 2020) 东方不败
7. Genting Malaysia - Place Your Bet When Banker Gets Hit Kenanga Research & Investment
8. TOP GLOVE - TARGET PRICES FROM ALL MAJOR INSTITUTIONS (27 MARCH 2020) 东方不败
Partners & Brokers