BEER is surely not a poor man’s drink whether to celebrate a joyous occasion or to douse one’s sorrow.
This comes amid news report that Carlsberg Brewery Malaysia Bhd is expected to raise its average selling prices (ASPs) of its beverages effective Nov 15.
“The previous ASP hikes were around 3% over the past few years. We believe the recent hike could be in the range of historical ASP revisions and we expect Heineken Malaysia Bhd to be in lockstep in terms of its ASP revision,” observed UOB Kay Hian’s analyst Philip Wong in a brewery sector update.
“However, we await confirmation from the respective corporates and clarity during the upcoming 3Q 2021 results prior to making changes to our earnings. We understand that raw material cost had been hedged till year-end and soft market conditions did not necessitate an ASP hike for 2021.
“Therefore, the quantum and timing is slightly ahead of our base expectations of a 1% ASP hike in 1Q 2022 (1Q is the usual price revision window).”
Regarding the potential licensing of liquor sales in coffee shops, UOB Kay Hian recalled that brewers had previously indicated that they do not expect such regulations to be implemented at this juncture given the existing challenging operating conditions.
Nevertheless, the research house contended that depending on the eligibility, application process, possible quota, licensing fee, grace period and success rate of these liquor licences, the impact to sales could be significant.
“The traditional on-trade channel accounts for 30%-35% of volume sales by our estimates, and the lion’s share is through coffee shops,” opined UOB Kay Hian Research. “However, we await further clarity and a tangible policy from the Government before accounting for it in our earnings estimates.”
This above comes in the wake of the Kuala Lumpur City Hall’s (DBKL) recent guidelines on beer sale which are only applicable to traditional grocery stores, convenience stores and Chinese medicine halls.
The three key measures are (i) sale of beer from 7am to 9pm only; (ii) separate display or exhibition of beer beverages from other forms of beverages; and (iii) display should be locked beyond allowed window of sale.
Elsewhere, both Carlsberg and Heineken are also unlikely to escape the wrath of cukai makmur as their projected 2022 earnings base exceeded RM100 mil.
“Our worst-case estimate for the one-off corporate prosperity tax of 33% for any income above RM100 mil that was introduced during Malaysia Budget 2022 is 5.6% and 8.4% for Carlsberg and Heineken’s earnings respectively,” projected UOB Kay Hian Research.
All-in-all, the research house does not expect Carlsberg and Heineken’s 3Q FY2021 results to excite but to foresee some overhang in the near term, especially in a possible general elections run-in year.
“However, beyond what we believe is a temporary lull; the brewery sub-sector remains among the most resilient in the consumer space,” added UOB Kay Hian Research which is still “overweight” on the sector. – Nov 3, 2021
