HEINEKEN Malaysia Bhd is expected to see a pickup in volume in 2021, boosted by major sporting events, from a low base in 2020, according to TA Securities.
“Looking ahead into 2021, demand and volume growth could pick up from a low base of 2020 when the macroeconomic environment improves alongside the resumption of activities and greater stability in job security,” said TA analyst Jeff Lye.
The analyst also noted that the postponement of major sporting events, such as the Euro Cup and the Japan Olympics, to 2021 could provide a booster to 2021 beer consumption.
This follows the brewer’s results for the second quarter of its 2020 financial year ended June 30, which saw a quarterly net loss of RM18 mil. This, Lye noted, was unprecedented due to the drastic drop in beer sales owing to the movement control order (MCO) and the suspension of operations at the brewery’s plant.
Moving forward, Lye believes that the worst of Covid-19 is over for Heineken, seeing as the brewer’s plant has returned to full operations with production and distribution activities intact.
“However, we acknowledge that the prohibition on selective on-trade outlets and temporal consumer’s avoidance of excessive gatherings may reduce Heineken’s net sales,” said Lye.
The analyst also believes that the probability of an excise tax hike in 2021 is low, due to brewers as a whole having been weakened by the Covid-19 pandemic.
“A further blow from an excise hike may be detrimental to the business landscape. Moreover, a hike in duties in the current environment may potentially encourage demands for contraband, which could pose a bigger danger to consumers alongside the economy,” said Lye.
TA Securities maintains a buy call on Heineken, with an unchanged target price of RM26.
“Heineken has a healthy balance sheet and the management’s focus to enhance cost efficiencies alongside protecting cash flow shall enable the group to navigate through the current uncertainties and enjoy the pick-up in 2021,” said Lye.
At the end of the morning’s trading, Heineken’s shares were last done at RM21.92, down 24 sen, with 67,700 shares traded. – Aug 17, 2020
