Heineken’s 9MFY21 results came broadly within our expectation as we are expecting a stronger performance ahead given the reopening of the economy. Post results, we maintain our FY21E CNP but slashed FY22E CNP by 10.3% with TP reduced to RM23.60. Reiterate MARKET PERFORM.

Broadly within expectations. 9MFY21 PATAMI of RM149.8m came in broadly within expectations, accounting for 55%/60% of our/consensus estimates as we expect a significantly better performance in 4QFY21 given the reopening of business activities especially the Horeca and tourism channels. No dividend was declared this quarter, as expected.

YoY, 9MFY21’s top-line grew moderately by 3.5% to RM1.3b as business, economic and social activities were affected by restrictions for the period under review. Absence of custom duty and improved margins work together to reduce opex (-2%). EBITDA margin also improved by 4.7ppt to 19.5% attributable to improved business efficiencies and on-going cost saving initiatives that were taken by the group. Given the lower base, PATAMI surged 50% to RM149.8m.

QoQ, 3QFY21 revenue increased by 11.6% to RM389.8m. Resumption of the broader economy and extension of operating hours of F&B outlets resulted in increased demand for alcoholic beverages.

Outlook. We remain optimistic on HEIM’s ability to report better performance ahead due to the easing of lockdown measures (longer operating hours of F&B’s and additional dine-in capacity). In addition, the reopening of borders to tourists will also boost the demand for alcoholic beverages. Moreover, the absence of a much-speculated increase in excise duty is a plus. The continuation of social events could also contribute to the demand for alcoholic beverages. The recently announced price hike of products is also seen favourably as it would improve HEIM’s margins. Finally, as the government reaches its targeted vaccination rates, entertainment outlets could be given the green light to operate as usual at pre-pandemic hours, thus potentially being the major driver for higher sales.

Post results, we maintain our FY21E CNP but slashed FY22E CNP by 10.3% due to reflect them being impacted by the Prosperity Tax. However, we foresee that this could partially be offset by a pent-up demand of beer sales.

Maintain MARKET PERFORM with a lower TP of RM23.60 (from RM23.90). Our TP is based on its 5-year mean PER of 26x (previously 24x) to reflect the anticipation of pent-up demand ahead and better margins though offset by the one-off Prosperity Tax.

Risks to our call include: (i) lower-than-expected sales volume, and (ii) rising cost of raw materials.

Source: Kenanga Research - 12 Nov 2021