Results Note RM23.24 @ 18 February 2021

Share price performance

1M 3M 12M Absolute (%) 1.6 8.4 -21.3 Rel KLCI (%) 3.7 10.3 -23.2

BUY HOLD SELL

Consensus 4 7 - Source: Bloomberg

Stock Data

Sector Consumer

Issued shares (m) 302.1

Mkt cap (RMm)/(US$m) 7051/1744

Avg daily vol - 6mth (m) 0.2

52-wk range (RM) 17.30 - 31.74

Est free float 46.1%

Stock Beta 1.02

Net cash/(debt) (RMm) (117.3)

ROE (CY21E) 66.3%

Derivatives Nil

Shariah Compliant No

Key Shareholders

GAPL PTE LTD 51.0%

OVERSEA CHINESE BANK 3.3%

VIRTUS INVESTMENT PA 2.4% Source: Affin Hwang, Bloomberg

0.00

5.00

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35.00

Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20 Feb-21

(RM)

Chow Wei Nien

T (603) 2146 7579

E weinien.chow@affinhwang.com

Earnings & Valuation Summary FYE 31 Dec 2019 2020 2021E 2022E 2023E Revenue (RMm) 2,320.2 1,762.4 1,991.8 2,173.8 2,306.0 EBITDA (RMm) 465.5 272.5 367.5 424.7 464.7 Pretax profit (RMm) 412.1 198.7 308.9 363.6 401.0 Net profit (RMm) 313.0 154.2 231.7 272.7 300.7 EPS (sen) 103.6 51.0 76.7 90.3 99.5 PER (x) 22.5 45.7 30.4 25.9 23.4 Core net profit (RMm) 313.0 175.4 231.7 272.7 300.7 Core EPS (sen) 103.6 51.0 76.7 90.3 99.5 Core EPS growth (%) 10.8 (50.7) 50.3 17.7 10.3 Core PER (x) 22.5 45.7 30.4 25.9 23.4 Net DPS (sen) 108.0 51.0 76.7 90.3 99.5 Dividend Yield (%) 4.6 4.6 3.3 3.9 4.3 EV/EBITDA 15.3 26.3 19.5 16.8 15.3 Chg in EPS (%) -4.7 -0.5 new Affin/Consensus (x) 1.1 0.9 - Source: Company, Affin Hwang estimates

Heineken Malaysia (HEIM MK)

HOLD (maintain) Price Target: RM22.70 Up/Downside: -2.7% Previous Target (Rating): RM22.00 (Hold)

Within expectations

Heineken posted a 2020 core net profit of RM175.4m (-44% yoy) – broadly within

our expectations but above consensus

Sequentially, revenue and core net profit trickled up to RM519.0m (+9.6%) and

RM68.2m (+11.3%) respectively, aided by the easing of strict lockdown

measures

Considering the renewed MCO and prolonged impact of the pandemic, we cut

FY21/22E earnings by -0.5/4.7% respectively. Maintain HOLD with a DCF-

derived TP of RM22.70.

2020 core net profit of RM175.4m (-44% yoy) within expectations

Heineken posted a 2020 revenue of RM1.76bn (-24% yoy) driven by lower sales and a

disruption in brewery operations amid a pandemic-hit year. We gathered that there was

a shift in consumption trends during the year, with on-trade and off-trade mix at 50:50 as

compared to 60:40 pre-Covid, as consumers shied away from outdoor activities. EBITDA

margins soften by -4.6ppt to 15.5%, tracking its lower volume sales, though slightly

cushioned by cost savings. The result was broadly within our (105%) but above

consensus expectations (110%).

Sequentially stronger ex. one-offs

On a sequential basis, HEIM posted revenue and core net profit of RM519m (+9.6%) and

RM68.2m (+11.3%) respectively, as a gradual recovery ensued with the easing of

lockdown measures. That said, the MCO that was reinstated in January 2021 is again

likely to hamper sales momentum as a result of reduced social gatherings and absence

of tourist arrivals. On a positive note, the group saw sales for its e-commerce platform,

Drinkies, improve +208% yoy, albeit the contribution remains low at <1%. Elsewhere, the

group declared a DPS of 51 sen for the year, representing a 100% payout – within

expectations.

Maintain HOLD

Considering the impact of the MCO and prolonged effect of the pandemic, we cut our

2021/22E estimates by 0.5-4.7%, factoring in lower volume sales. Nonetheless, as we

temper higher longer-term growth trajectory for Heineken, our DCF-derived TP post

revision is revised slightly higher to RM22.70. Maintain HOLD, given the limited upside at

this juncture, as the brewers remain susceptible to prolonged pandemic uncertainties.

Up/downside risks: (i) earlier/later-than-expected containment of Covid-19 and (ii) sharp

decline/spike in raw-material costs.

19 February 2021

“Pandemic uncertainties remain a hindrance”

2

Fig 1: Results Comparison

FYE Dec (RMm) 4Q19 3Q20 4Q20 QoQ YoY

2019

2020 YoY Comments

% chg % chg % chg

Revenue 680.0 473.8 519.0 9.6 (23.7) 2,320.2 1,762.4 (24.0) YoY decline due to lockdown and suspension of brewery during MCO 1.0. QoQ higher on easing of lockdown measures.

Op costs (542.0) (375.1) (417.1) 11.2 (23.0) (1,854.7) (1,489.9) (19.7)

EBITDA 138.0 98.7 101.9 3.3 (26.2) 465.5 272.5 (41.5)

EBITDA margin (%) 20.3 20.8 19.6 -1.2 ppt

-0.7 ppt

20.1 15.5 -4.6 ppt

Flow through from lower sales

Depn and amort (16.8) (16.8) (19.2) 14.4 14.6 (51.1) (68.8) 34.6

EBIT 121.2 81.9 82.7 1.0 (31.8) 414.4 203.7 (50.9)

EBIT margin (%) 17.8 17.3 15.9 -1.4 ppt

-1.9 ppt

17.9 11.6 -6.3 ppt

Int expense (1.1) (1.4) (1.3) (9.0) 15.1 (2.3) (4.9) 117.3

Int and other inc 0.0 0.0 0.0 n.m n.m 0.0 0.0 n.m

Associates 0.0 0.0 0.0 n.m n.m 0.0 0.0 n.m

EI 0.0 0.0 (14.0) n.m n.m 0.0 (21.2) n.m Includes RM14m provision for restructuring exercise and RM7.2m custom’s bill of demand

Pretax 120.1 80.5 67.4 (16.3) (43.9) 412.1 198.7 (51.8)

Tax (29.0) (19.2) (13.2) (31.2) (54.3) (99.2) (44.5) (55.1)

Tax rate (%) 24.1 23.9 19.6 -4.3 ppt

-4.5 ppt

24.1 22.4 -1.7 ppt

MI 0.0 0.0 0.0 n.m n.m 0.0 0.0 n.m

Net profit 91.2 61.3 54.2 (11.6) (40.6) 313.0 154.2 (50.7)

EPS (sen) 30.2 20.3 17.9 (11.6) (40.6) 103.6 51.0 (50.7)

Core net profit 91.2 61.3 68.2 11.3 (25.2) 313.0 175.4 (44.0) Within our expectations (105%) but above consensus (110%)

Source: Affin Hwang, Company

3

Important Disclosures and Disclaimer

Equity Rating Structure and Definitions

BUY Total return is expected to exceed +10% over a 12-month period

HOLD Total return is expected to be between -5% and +10% over a 12-month period

SELL Total return is expected to be below -5% over a 12-month period

NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a

recommendation

The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.

OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months

NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months

UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months

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