PETALING JAYA: Heineken Malaysia Bhd
is set to benefit from resilient consumer demand, supported by higher minimum wages, robust tourist arrivals and effective promotional and marketing campaigns.
TA Research highlighted that these factors are expected to sustain consumer demand, reiterating its “buy” recommendation with a target price of RM28.02 for Heineken’s stock.
The brokerage noted that the brewing company’s nine-month (9M24) core earnings of RM325.9mil were aligned with its expectations, accounting for 78% of the full-year forecast and surpassing consensus estimates at 81%.
“We project a profit before tax margin of 18.8% for financial year 2024 (FY24) – (3Q24: 20.8%) – mainly due to (expected) higher operating expenses incurred in the final quarter.
“These expenses are aimed at driving top-line growth in 4Q24 and supporting increased marketing efforts in preparation for Chinese New Year sales in January 2025,” TA Research told clients in a report.
Meanwhile, Maybank Investment Bank (IB) Research also said the company’s outlook remained positive as festive-led spending is expected to drive sales volume in the 4Q24.
“An expected increase in consumer disposable income, coupled with potential raw material cost savings from favourable forex movements, may also aid earnings momentum into FY25,” it added.
Heineken’s 3Q24 results exceeded the research house’s expectations on lower- than-expected effective tax rate and operating margin expansion.
“Sales momentum should accelerate, driven by festive spending and expectation for a rise in disposable income in FY25.
“Our FY24-FY26 earnings estimates are raised by 6% to 7%.
“At 16 times FY25E price earnings ratio, Heineken is trading at undemanding valuations,” the brokerage said.
Maybank IB Research maintained its “buy” call on Heineken with a higher target price of RM30.20.
It noted that Heineken’s 3Q24 revenue grew 9% quarter-on-quarter as sales volume began to recover after an adverse knee-jerk reaction to consumption post product price hikes in April.
Supply chain efficiencies and stronger sales execution also helped boost earnings, the brokerage added.
The research house raised its FY24, FY25 and FY26 earnings estimates by 7%, 6% and 6%, respectively, upon adjusting for a lower effective tax rate of 21% in FY24 and higher earnings before interest and tax margins by around one percentage point per annum.
Maybank IB Research noted several risk factors that could affect the company including an unfavourable regulatory environment, for example from excise tax shock, and a spike in raw material prices.
