Heineken earnings recovery to continue despite near-term challenges

KUALA LUMPUR: Heineken Malaysia Bhd is expected to continue its earnings recovery amid the progress of ongoing Covid vaccinations, said Kenanga Research.

The research house said it maintains its view on the brewer's earnings recovery and maintained its forecasts despite near-term challenges.

In 1QFY21, Heineken's core net profit of RM74mil was in line with expectations at 27% and 28% of Keannga's and consensus full-year estimates.

"The on-trade beer volumes are likely to remain flat amidst the re-imposition of movement restrictions due to the alarmingly high Covid-19 local cases of late.

"We note that given its domestically based operations, earnings are likely to be challenged as the lockdown persists into subsequent quarters which historically contributed a higher portion of yearly earnings," said Kenanga.

The research house reiterated "market perform" on the stock and raised its target price to RM25.14 from RM22.35 as it rolled forward its valuation base to FY22 price-earnings of 24.6x from 25x previously with minus-0.5 standard deviation attached to its three-year mean to reflect the near-term challenges ahead.
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