Its FY21 results came broadly within expectations and we are expecting stronger performance ahead given the reopening of the economy. Post results, we bumped our FY22E revenue by 5.6% to RM2.2b and revised higher the CNP in tandem by 5.9% to RM286.0m on increased demand for alcoholic beverages. We also introduce our FY23E earnings. Maintain MP but lower Target Price to RM20.50.

In line. FY21 PATAMI of RM245.7m came in within our and market expectations, at 114% and 107%, respectively. The group registered their highest revenue in 4QFY21 of RM692.3m (vs. RM680.0m in 4QFY19 – pre-pandemic era) due to the resumption of business activities. The 66.0 sen dividend per share declared for the quarter brought the full-year dividend to 81.0 sen (vs. our full year expectation of 75.0 sen).

Results’ highlight. YoY. FY21 top-line surged by 12.3% to RM1.9b as business, economic and social activities picked up coupled with improved revenue management by the group. This is deemed justifiable despite the group having to face an 11-week lock-down period for the year under review (vs. only a 7-week lockdown in FY20). EBITDA margin also improved by 4.5ppt to 19.9% attributed to cost savings derived from group-wide synergies.

QoQ, 4QFY21 sales increased by 77.6% to RM692.3m, boosted by increased demand for alcoholic beverages due to the year-end holiday season coupled with festive activities.

Challenges continue. The group is expected to incur higher cost of raw materials as a result of rising inflation and disruption in the supply chain.

Outlook. Taking into account of the abovementioned, coupled with the surge in the Omicron variant, the group could mitigate these by further streamlining their operations. In addition, we believe that HEIM would be able to leverage on its attractive product mix and further expand its customer base. Finally, as the government reaches its targeted vaccination rates, entertainment outlets could be given the green light to operate again as usual at pre-pandemic hours - this potentially being a major driver for increased beer sales. ESG-wise, the group would be focusing on the following aspects: (i) achieving carbon neutral production by 2030, (ii) improving water conservation practices, and (iii) promoting responsible consumption.

Post results, we bumped our FY22E revenue by 5.6% to RM2.2b and revised the CNP in tandem by 5.9% to RM286.0m on higher demand for alcoholic beverages. We also introduced our FY23E earnings.

Maintain MARKET PERFORM with a lower TP of RM20.50 (from RM23.60). Our TP is based on its 5-year mean PER of 21.7x (previously 26x) to reflect elevated input cost – crimping earnings.

Risks to our call include: (i) rising cost of raw materials, (ii) lower than-expected sales volume and (iii) potential lockdown measures being imposed to curb the Omicron variant.

Source: Kenanga Research - 17 Feb 2022