KUALA LUMPUR: Heineken Malaysia Bhd's earnings momentum is anticipated to persist, fuelled by stable demand, rising tourist numbers, price increases, a stronger ringgit, and ongoing measures to reduce illicit trade, according to RHB Investment Bank Bhd (RHB Research).
Heineken Malaysia posted a net profit of RM214 million, reflecting a 7 per cent year-on-year (YoY) growth, which represents 51 per cent of the bank's forecasts and 53 per cent of market expectations.
"Following the results, we are maintaining our earnings forecasts and Dividend Discount Model-derived target price of RM29.60.
"This valuation implies a 20 times financial year 2025 (FY25) price to earnings (P/E), higher than peer Carlsberg Brewery Malaysia Bhd, justified by Heineken's market leadership in Malaysia and its higher dividend payouts," it said.
RHB Research noted that despite cautious consumer sentiment due to high inflation, beer consumption has remained resilient, supported by inelastic demand and effective marketing initiatives.
"We expect the momentum to carry through into the second half of 2024 (2H24), with earnings growth to be also underpinned by the encouraging tourist arrivals, strengthening ringgit, which should improve consumer sentiment and translate to lower production costs for Heineken – as well as price increases implemented to protect profit margins.
"Meanwhile, we do not expect an excise duty hike in the foreseeable future, considering the potential threat of rising illicit trade," it said.
The bank has maintained the 'buy' call on the brewery company with a target price of RM29.60.