1QFY21 is within expectations of both our and consensus estimates. However, near-term challenges still persist with resurging cases of the pandemic coupled with its mainly local based business. TP is raised to RM25.15 as we roll over our valuation base to FY22E but maintain its MP rating. It is fairly valued at this juncture, in our view.

Within expectations. 1QFY21 CNP of RM74m came in line accounting for 27%/28% of our/consensus estimates. No dividend declared for the quarter as expected.

Overall stronger results. YoY, results were commendable given the lockdown in place as compared to the previous corresponding period. Top-line was up by 6% to RM547.7m as business and consumers gradually adapted to the new normal, easing of lockdown restrictions in March and effective execution of various campaigns i.e. promotions and giveaways. EBITDA margin improved 4ppt to 21% given the subdued commercial activities and deferment of commercial costs. With an unchanged ETR, CNP ended 29% higher to RM73.5m.

QoQ, revenue improved moderately by 5% to RM547.7m on account of Chinese New Year sales and the easing of lockdown restrictions. Opex was well contained, up just a marginal 0.3%, while EBIT margin saw a 5ppt uptick to 18% given the subdued capex (RM7m vs. 4QFY20: RM22m) resulting CNP ending 36% higher for the quarter.

Near-term volatility remains. Despite near-term challenges, we maintain our view of earnings recovery depending on the efficacy of the on-going vaccinations roll-out by 2H 2021. However, the on-trade beer volumes are likely to remain flat amidst the re imposition of movement restrictions due to the alarmingly high Covid-19 local cases of late. We note that given its domestically based operations, earnings are likely to be challenged as the lockdown persists into subsequent quarters which historically contributed a higher portion of yearly earnings.

Post results, we make no changes to our FY21E/FY22E earnings as the results are in line.

Maintain MARKET PERFORM but with higher TP of RM25.15 (from RM22.35), as we roll our valuation base to FY22E PER of 24.6x (from 25.0x) with a -0.5SD attached to its 3-year mean to reflect the near-term challenges ahead.

Risks to our call include: (i) weaker/stronger-than-expected sales volume, and (ii) higher/lower-than-expected operating expenses.

Source: Kenanga Research - 21 May 2021