KUALA LUMPUR: Following Heineken Malaysia Bhd’s strong first quarter ended March 31 (1Q22) results, the group is anticipated to post a decent performance for 2Q22, driven by the resurgence in mobility and consumer confidence.

       Heineken’s 1Q22 financial results exceeded expectations of most brokerage firms with well sustained sales.

       UOB Kay Hian (UOBKH) Research said the group’s net profit of RM113.4mil for 1Q22 was well above its and consensus expectations, representing 40% of both its and consensus’ full-year forecasts.

       It also enjoyed enhanced margins off lifted average selling prices (ASPs) and favourable timing with its commercial spending.

       “Recent mobility data suggests 2Q22 could see a decent performance as well,” said the research firm.

       UOBKH noted that the group’s cost is well managed.

       “Despite rising commodities prices, this translates minimally in terms of ASPs. This is because raw material and packaging account for around 15% of revenue by our estimates.”

       It added that the primary cost component is excise duties, which according to its estimates, accounted for 45% of revenue.

       Given these economics, a 10%-20% higher input cost translates into a very palatable ASP hike of 1.5%-3%, which is in line with the yearly ASP hike, it added.

       Moreover, Heineken had already raised ASPs in 4Q21 in anticipation of higher locked-in input cost for 2022.

       According to UOBKH, the stock offers decent 2022-2024 yields of 4.5%-5.1%, based on a 100% payout. This valuation is supported by the strong expected rebound in earnings and Heineken being a defensive shelter amid increase market premium risk.

       Meanwhile, CGS-CIMB Research said Heineken should benefit from a more profitable sales mix as it believes on-trade sales, estimated at 60% of total preCovid-19 sales, enjoy better margins than off-trade sales.

       “We expect Heineken to record a robust recovery in financial year 2022 forecast sales volume (+18% year-on-year).

       “This is backed by the lifting of lockdown measures since 4Q21, which set the stage for a strong recovery, especially in on-trade sales volume,” it added.

       The research firm maintains its “add” call on the stock with a higher target price of RM29.