Quick take: Heineken shares climb modestly on earnings

KUALA LUMPUR: Heineken Malaysia Bhd shares enjoyed modest gains this morning after a reporting a 4.6% jump in its net profit for the financial year ended Dec 31, 2018 (FY18),

The stock rose 26 sen, or 1.14% to RM23.12 in early morning trading.

Heineken’s net profit for the fourth quarter ended Dec 31, 2018 grew 6.8% to RM100mil compared with RM93.64mil in the same period last year due to higher revenue as well as efficient and effective management of commercial spend and overheads.

Its revenue grew 12.3% to RM662.28mil against RM589.96mil in the same quarter in 2017 mainly due to increase in sales volume driven by the flagship Tiger brand.

For the full year period, Heineken posted a net profit of RM282.5mil on revenue of RM2.03bil. It has proposed a final dividend of 54 sen per share for the quarter under review, bringing the full-year dividend payout to 94 sen.

“Heineken Malaysia (HEIM)’s 2018 results exceeded our expectations but tracked consensus estimates, accounting for 108% and 102% of 2018 estimates respectively,” Affin Hwang Capital Research said.

It said Heineken’s strong 4Q18 performance came in tandem with that of its competitor, Carlsberg (CAB), albeit weaker than CAB’s 30% year-on-year local sales growth in 4Q18.

“We remain optimistic on overall industry demand for both brewers heading into 2019. Organic growth, alongside a potential decline in the contraband beer market (c.25-30% total market) would therefore support Heineken’s earnings outlook,” Affin said.

The research house has raised its 2019-20E EPS by 4.5%/4.4% respectively to reflect better sales performance and cost control going forward, and also introduce its 2021E estimates.

“However, we downgrade the stock to a ‘hold’ call (from buy) following its recent share price outperformance, but with a higher DCF-derived target price of RM23.80,” Affin said.

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