KUALA LUMPUR: Hong Leong Investment Bank (HLIB Research) expects Heineken Malaysia Bhd to achieve earnings growth in the financial year 2024 (FY24), driven by the expectation of higher beer sales volume amidst improving consumer sentiment.
It said the group has observed an uptick in consumer sentiment since the fourth quarter of 2023 (Q4 2023), and this trend has extended into the Chinese New Year period.
"The group expresses hope for the sustained momentum of this trend. This aligns with our anticipation of Heineken Malaysia's FY24 beer sales recording improvement, supported by the ongoing gradual enhancement in labour market conditions and income prospects, which should bolster domestic demand, and the relatively more inelastic demand for beer, as it remains the most affordable alcoholic beverage in the market.
"Additionally, the continued influx of tourist arrivals, particularly from China, is expected to stimulate higher beer consumption," it said.
The brewer is presently trading at an undemanding valuation of 17.9 times its FY25 precise-earnings (P/E) ratio, coupled with an attractive dividend yield of 5.8 per cent.
"Notably, Heineken Malaysia's current valuation is lower than pre-pandemic 2018-2019's average forward P/E of 23.6x, despite FY23 earnings of RM383.0 million surpassing pre-pandemic 2019's level of RM312.9 million."
It maintained "buy" on the company with a target price of RM29.94, implying a potential return of 28.4 per cent.