Carlsberg’s 1H21 core PATAMI of RM100.4m (+10.0% YoY) was in line with ours and consensus expectations. While only accounting for 43.4%/42.7% of our/consensus expectations respectively, we deem this in line as we expect 2H21 to be comparatively stronger due to relaxing of movement restriction rules supported by accelerated vaccination rate. Our forecasts remain unchanged. We maintain our HOLD call and DCF-derived TP of RM21.75 (WACC: 8.0%, TG: 2.5%).

In line with expectations. Carlsberg’s 2Q21 core PATAMI of RM40.1m (QoQ: -33.3%, YoY: +119.1%), brought 1H21 sum to RM100.4m (+10.0% YoY). While only accounting for 43.4%/42.7% of our and consensus expectations respectively, we deem this in line as we expect 2H21 to be comparatively stronger (particularly 4Q21) thanks to progressive relaxing of movement restrictions supported by accelerated vaccination rate. 1H21 core PATAMI was arrived at after adjusting for forex losses of RM3.0m.

Dividend. 2Q21 DPS of 10 Sen Going Ex on 15/10/21. 1H21: 10 Sen Vs 1H20: None.

QoQ. Revenue declined -34.4% due to both Malaysia and Singapore re-imposing lockdown measures as Covid-19 cases rose in 2Q21. Note that from early June, Carlsberg suspended their brewery operations. Core PATAMI decreased -33.3% in tandem with lower revenue.

YoY. Shorter lockdown duration in 2Q21 compared to SPLY led to higher revenue by +21.6%. Coupled with better cost controls, core PATAMI rose by +119.1%.

YTD. Revenue was flat (+0.5%) as poorer performance in Malaysia was offset by better revenue in Singapore. Lesser Malaysia revenue (-8.2%) from lower volumes (-21%) was due to MCO2.0-3.0 and Phase 1 this year. Singapore revenue, however was higher (+25.6%) of the back of higher volumes (+26%) on recovery with reopening of on-trade and momentum in e-commerce sales channel. Despite flat revenue, core PATAMI rose +10.0% due to lesser marketing spend. Carlsberg shared two notable bright spots: (i) premium brands (Connors, 1664 Blanc, Asahi etc.) continued to grow (+16%); and (ii) e-commerce sales volume rose (+205%) from more focused efforts with various e-retailers (Shopee, Lazada, etc.).

Outlook. Carlsberg’s outlook remains mixed. On a positive note, dine-in in Phase 1 areas has recently been allowed for fully vaccinated individuals in Malaysia. Furthermore, Carlsberg’s brewery operations have resumed from 16 Aug 2021 with 80% on-site personnel. However, hurdles remain notably, (i) entertainment venues and bars in Malaysia remain closed; and (ii) Covid-19 cases in Malaysia continue to rise, leading us to believe consumers may be reticent to return to available on-trade venues for the time being.

Forecast. Unchanged.

Maintain HOLD. TP: RM21.75. We maintain our HOLD call and DCF-derived TP of RM21.75 (WACC: 8.0%, TG: 2.5%).

Source: Hong Leong Investment Bank Research - 23 Aug 2021