KUALA LUMPUR (March 5): Hong Leong Investment Bank (HLIB) Research said it anticipates Heineken Malaysia Bhd to achieve year-on-year (y-o-y) earnings growth in the financial year 2024 (FY2024), driven by the expectation of higher beer sales volume amidst improving consumer sentiment.

In a technical tracker on Tuesday, the research house said the group has observed an uptick in consumer sentiment since the fourth quarter of 2023 (4Q2023), 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’s FY2024 beer sales recording improvement, supported by (i) the ongoing gradual enhancement in labour market conditions and income prospects, which should bolster domestic demand, and (ii) 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.

HLIB said that after correcting 21% from the 52-week high of RM29.50 to Monday’s RM23.30, Heineken is presently trading at an undemanding valuation of 17.9 times FY2025 price earnings (P/E) (22% discount against its five-year mean of 23 times), coupled with an attractive dividend yield of 5.8%.

Notably, it said Heineken’s current valuation is lower than the pre-pandemic 2018-2019’s average forward P/E of 23.6 times, despite FY2023 earnings of RM383.0 million surpassing pre-pandemic 2019’s level of RM312.9 million.

“All in, we maintain a 'buy' rating with a target price of RM29.94, implying a potential return of 28.4%.

“Heineken is currently pending for a double bottom breakout with indicators showing uptick bias.

“A successful breakout above RM24 neckline will signal a trend reversal and potentially spur the share price towards RM25.35-26.49-28. Cut loss at RM20.64,” it said.