Another record year projected for local brewers

KUALA LUMPUR: Carlsberg Brewery Malaysia Bhd Heineken Malaysia Bhd are expected to register another record sales performance in 2020, says Affin Hwang Capital research.

The research house expects total earnings to register 10% growth in 2020 with margins projected to hold up due to easing production input costs expected.

The brewers' volume sales are supported by healthy consumption trends under a captive duopoly malt liquor market, while higher tourist arrivals from Visit Malaysia 2020 and the ongoing clampdown on contraband alcohol could help to boost demand.

"Both Carlsberg and Heineken’s medium-term outlooks remain positive, with growth catalysts for the former arising from premiumisation, while the latter stands to benefit from its e-commerce foray and new product launches," it added.

The brewers have showed commendable earnings delivery in recent quarters with double-digit top-line growth registered since 4Q18 despite three successive round of price hikes from April 2019 to April 2019.

"While this was partially attributable to the clampdown in contraband alcohol (said to command 20-30% of the malt liquor market), the sustainable growth drivers are nonetheless tied to an expanding market size and favourable consumption patterns, in our view," said Affin Hwang.

It maintained its hold call on Carsberg with a higher target price of RM28.50 following its recent share-price outperformance and kept its buy call on Heineken with a raised target price of RM29.

"Heineken is our preferred pick as the sector laggard, with implied upside of 15% and higher 2019-21E yields of c.4-5%," it added.
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