• Heineken posted a 2020 core net profit of RM175.4m (-44% yoy) – broadly within our expectations but above consensus

• Sequentially, revenue and core net profit trickled up to RM519.0m (+9.6%) and RM68.2m (+11.3%) respectively, aided by the easing of strict lockdown measures

• Considering the renewed MCO and prolonged impact of the pandemic, we cut FY21/22E earnings by -0.5/4.7% respectively. Maintain HOLD with a DCFderived TP of RM22.70.

2020 Core Net Profit of RM175.4m (-44% Yoy) Within Expectations

Heineken posted a 2020 revenue of RM1.76bn (-24% yoy) driven by lower sales and a disruption in brewery operations amid a pandemic-hit year. We gathered that there was a shift in consumption trends during the year, with on-trade and off-trade mix at 50:50 as compared to 60:40 pre-Covid, as consumers shied away from outdoor activities. EBITDA margins soften by -4.6ppt to 15.5%, tracking its lower volume sales, though slightly cushioned by cost savings. The result was broadly within our (105%) but above consensus expectations (110%).

Sequentially Stronger Ex. One-offs

On a sequential basis, HEIM posted revenue and core net profit of RM519m (+9.6%) and RM68.2m (+11.3%) respectively, as a gradual recovery ensued with the easing of lockdown measures. That said, the MCO that was reinstated in January 2021 is again likely to hamper sales momentum as a result of reduced social gatherings and absence of tourist arrivals. On a positive note, the group saw sales for its e-commerce platform, Drinkies, improve +208% yoy, albeit the contribution remains low at <1%. Elsewhere, the group declared a DPS of 51 sen for the year, representing a 100% payout – within expectations.

Maintain HOLD

Considering the impact of the MCO and prolonged effect of the pandemic, we cut our 2021/22E estimates by 0.5-4.7%, factoring in lower volume sales. Nonetheless, as we temper higher longer-term growth trajectory for Heineken, our DCF-derived TP post revision is revised slightly higher to RM22.70. Maintain HOLD, given the limited upside at this juncture, as the brewers remain susceptible to prolonged pandemic uncertainties. Up/downside risks: (i) earlier/later-than-expected containment of Covid-19 and (ii) sharp decline/spike in raw-material costs.

Source: Affin Hwang Research - 19 Feb 2021