Overview of Heineken Malaysia Bhd

Heineken Malaysia Bhd, a market leader in the malt liquor industry, continues to dominate with its flagship brands such as Tiger, Heineken, and Guinness Anchor. The company operates within the Consumer Staples sector and is listed under the Bloomberg ticker HEIM MK.

As of this report, the company’s share price stands at RM24.80 with a target price of RM30.00, indicating a potential upside of 21.0%. This represents an increase from the previous target price of RM29.20, affirming the stock’s strong performance and future potential.

Heineken Malaysia’s financial metrics include an FY25 NAV/share of RM2.38 and a net debt/share of RM2.05. The company has a market capitalization of RM7,492.0 million (approximately USD 1,676.1 million) and boasts major shareholders such as GAPL Pte Ltd (51.0%), Virtus Investment Partners (3.9%), and OCBC (3.1%).

4Q24 Financial Performance: Breaking Expectations

Heineken Malaysia’s 4Q24 results exceeded expectations, driven by robust holiday buying and a favorable Chinese New Year timing. Revenue for the quarter surged to RM823.1 million, marking a 33.0% quarter-on-quarter (qoq) growth and a 13.0% year-on-year (yoy) increase. This growth was attributed to pre-sales being front-loaded into the quarter.

Margins expanded due to continued cost efficiencies, resulting in an impressive core net profit of RM136.3 million, a 39.3% qoq and 37.5% yoy increase. The company declared a final dividend of 115 sen, bringing the total dividend for the year to 155 sen, representing a payout ratio of 104.5% of earnings per share (EPS), including a one-off tax credit.

Key Financial Metrics

Market Share and Competitive Landscape

Despite the strong financial performance, Heineken Malaysia saw its market share decline by 2.7 percentage points in 2024 to 61.5%. This was attributed to reduced marketing efforts as competitors aggressively pushed for market share. However, the company remains the largest player in Malaysia’s malt liquor market.

Macroeconomic and Industry Trends

Macroeconomic factors such as geopolitical tensions and the strengthening of the ringgit in 2H24 are expected to influence Heineken Malaysia’s performance in the coming quarters. On the positive side, Malaysia recorded 25 million tourist arrivals in 2024, a 24.2% yoy increase, which is anticipated to benefit the company’s on-trade channels.

ESG Initiatives

Heineken Malaysia has made significant strides in its Environmental, Social, and Governance (ESG) efforts:

• Environmental: Improved water efficiency by 16% since 2014 and achieved zero waste to landfill while reducing CO2 emissions by 40% in production compared to 2008.
• Social: Allocated over 10% of its media budget to responsible consumption campaigns.
• Governance: Achieved a 57:43 male-to-female ratio on its board and a 50:50 gender ratio among middle to senior management positions.

Valuation and Recommendation

UOB Kay Hian maintains its BUY recommendation for Heineken Malaysia with an upgraded target price of RM30.00. This valuation is based on a discounted cash flow (DCF) model using a WACC of 7.8% and a terminal growth rate of 2.7%. The target price implies a 19.5x 2025F PE, in line with its five-year mean.

The stock is attractive due to its solid dividend yield of 6.2-6.8% for 2025-2027, supported by a 100% payout ratio.