Review

• Heineken Malaysia Berhad’s (Heineken) 9MFY24 core earnings of RM325.9mn aligned with our expectations at 78% of the full-year forecast, surpassing consensus estimates at 81%.

• In 3Q FY24, core net profit rose by 28.6% YoY to RM112.3mn, driven by higher turnover of RM619.0mn (+3.2% YoY) and effective cost management. This resulted in a 10.7% YoY growth in EBIT to RM130.1mn, improving the EBIT margin by 1.4%-pts YoY to 21.0%.

• For 9MFY24, revenue grew marginally by 3.4% YoY to RM2.0bn, primarily due to stronger Chinese New Year sales of RM789.2mn in 1QFY24 compared to RM740.2mn in 1QFY23. Consequently, core earnings rose by 13.3% YoY to RM325.9mn, supported by i) higher turnover, ii) improved operational efficiency, resulting in a 9.0% YoY increase in EBIT to RM417.0mn, and iii) a 7.6% YoY reduction in tax expenses to RM84.2mn, benefiting from reinvestment allowance tax credits that reduced deferred tax liabilities.

• No dividend was declared for the quarter under review.

Impact

• No change to our FY24-26 earnings projections.

Outlook

• Going forward, we expect consumer demand to remain resilient, supported by i) higher minimum wages that will boost discretionary spending, ii) robust tourist arrivals driving growth in on-trade sales, and iii) effective promotional and marketing campaigns to enhance revenue growth.

• Additionally, we project a PBT margin of 18.8% for FY24 (3QFY24: 20.8%), mainly due to higher operating expenses incurred in the final quarter. These expenses are aimed at driving topline growth in 4QFY24 and supporting increased marketing efforts in preparation for Chinese New Year sales in January 2025.

Valuation

• We reiterate our BUY recommendation with a TP of RM28.02/share (k: 8.0%, g: 3.0%), along with a 3% ESG premium, based on DCF valuation.

Source: TA Research - 13 Nov 2024