Heineken Malaysia rises to record high and Carlsberg closes up 66 sen on hopes of return of Chinese tourists

KUALA LUMPUR (Feb 2): Brewery stock Heineken Malaysia Bhd’s shares hit an all-time high of RM29.50 on Thursday morning after rising by as much as RM1.50 or 5.36% as investors are betting that China’s reopening will bode well for the stock.

In anticipation of the return of Chinese tourists, Heineken topped the gainer list on Bursa Malaysia on Thursday, with a closing price of RM29 — up RM1 or 3.57%, valuing the group at RM8.76 billion.

Since early this year, the stock has gained 15.1%. And over the past year, it has recorded a whopping 41.33% gain from RM20.52 on Feb 3, 2022.

Meanwhile, Carlsberg Brewery Malaysia Bhd — the third top gainer on the local bourse — also jumped as much as 66 sen or 2.8% to RM24.20 in morning trade, compared with its previous closing price of RM23.54.

It closed at its intra-day high of RM24.20, bringing the company a market capitalisation of RM7.4 billion. The stock has increased 20.28% from RM20.12 on Feb 3, 2022.

Of the 13 analysts covering Heineken, 11 have 'buy' calls, while the remaining two have 'hold' recommendations. The average 12-month target price for Heineken is RM29.64, with HSBC’s target price of RM33 being the highest.

For Carlsberg, there are eight 'buy' calls, and five 'hold', with a 12-month average target price of RM26.59.

Heineken's net profit for the third quarter ended Sept 30, 2022 (3QFY22) doubled to RM108.74 million from RM51.02 million in the same period last year, mainly driven by improved revenue growth, besides efficient cost and value initiatives. This also lifted its nine-month net profit by 105.69% to RM308.19 million from RM149.83 million in the same period a year ago.

Carlsberg also delivered stellar financial results, with its net profit for 3QFY22 climbing almost three-fold to RM76.39 million from RM25.98 million in the same period last year, contributed by higher contributions from both Malaysian and Singaporean operations. For the cumulative nine-month period, its net profit almost doubled to RM256.93 million from RM129.57 million.

In a recent note, CGS-CIMB Research expects the reopening of China’s economy and international borders from Jan this year to bode well for consumer counters.

Chinese tourists are Malaysia's third-largest source of international arrivals and second-highest spending tourists in 2019. Hence, the expected gradual return of China tourists is set to have positive spillover effects on Malaysian companies with overseas exposure, the research outfit added.

Another tailwind for the consumer sector, the research house pointed out, is the easing of input costs due to lower commodity prices as global supply chains gradually return to normalcy, leading to higher production volume, which could improve the supply-demand dynamics.

“Given this, coupled with declining freight rates, we believe consumer companies would benefit, especially food and beverage manufacturers and retailers, in terms of margins, as they have also raised prices over the past year,” it said.

While the research house expects input costs to ease in 2023, it cautioned that the impact could be offset by rising operating costs and weaker consumer spending power. Hence, the research house maintained a 'neutral' call on the overall consumer sector.