CEO Morning Brief

Heineken, Carlsberg Shares Rise on Upbeat Sentiment

Publish date: Thu, 07 Apr 2022, 12:00 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (April 7): Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd were among the top gainers in morning trade on Bursa Malaysia as sentiment in the brewing sector was positive amid the lifting of Covid-19 pandemic restrictions.

At the time of writing, Heineken — the biggest gainer — was up 3.72% or 84 sen at RM23.40, with about 323,800 shares traded. At the opening bell, the share price was at RM22.60 before rising to a high of RM23.44.

Based on the current price, the stock was valued at RM7.03 billion with a dividend yield of 3.48%.

Meanwhile, Carlsberg rose 60 sen or 2.75% to RM23.40, giving the second gainer's stock a market capitalisation of RM6.85 billion. The price-to-earnings (PE) ratio was 34.1 and the dividend yield was 2.5%.

Hong Leong Investment Bank (HLIB) Research upgraded its recommendations on Heineken and Carlsberg to "buy" and consequently raised its rating on the brewery sector to "overweight".

The research firm raised its target price (TP) for Heineken to RM24.92 from RM22.50, but its earnings forecast remained unchanged.

"Our TP represents a PE multiple of 25.4x, which is at its 5-year historical mean, based on a FY22f EPS of 98.1 sen," said the research house in a note dated April 6.

As for Carlsberg, HLIB revised the group's FY22-FY23 profit forecast downwards by about 3% due to housekeeping changes. Carlsberg's financial year ends on Dec 31.

However, the research firm raised Carlsberg's TP to RM24.62 from RM21.43 previously.

"We value Carlsberg based on a PE multiple of 27.8x (at its 5-year mean) on its FY22f EPS of 88.6 sen," it said.

Furthermore, HLIB expects the lifting of restrictions on Covid-19 pandemic starting from April 1 to help boost retail sales for brewers.

"With the more upbeat sentiment on the brewers following the nation's transition to endemicity, we believe investors are more likely to eyeball near-term growth rather than longer-term earnings, therefore we change our valuation method on the brewers from discounted cash flow to a PE-based methodology," it added.

Source: TheEdge - 7 Apr 2022

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