Keep the drinks coming

Maintain BUY with a higher DCF-TP of MYR26.60

HEIM’s 3Q21 results were above our expectations. The earnings surprise was mainly attributed to higher-than-expected sales which were driven by the allowance of dine-ins in on-trade channels from mid-Aug 2021 onwards. Adjusting for stronger volumes, our earnings estimates are lifted by 7% p.a.. Maintain BUY with a higher DCF-TP of MYR26.60 (WACC: 7%, LT
growth: 3%).

Earnings surprised

HEIM’s 3Q21 core net profit of MYR51m (-17% YoY, +102% QoQ) brought 9M21 core net profit to MYR150m (+40% YoY), representing 71%/68% of our/consensus full-year earnings estimates. 9M typically accounts for c.65% of full-year estimates in the lead up to a seasonally stronger 4Q. Stronger-than-expected sales volume contributed to the earnings beat.


On-trade channel sales have returned

3Q21 revenue increased 12% QoQ led by a surge in on-trade channel sales volume when dine-outs were allowed from mid-Aug 2021 onwards. HEIM’s pre-tax profit widened 103% YoY given continued cost management, A&P optimization and right-sizing of the organization. Meanwhile, 3Q21 revenue and pre-tax profit fell 18% YoY and 17% YoY respectively largely due to HEIM’s halt in brewery operations from 1 Jun to 15 Aug 2021.

FY21-FY23 earnings estimates raised by 7% p.a.

Factoring in the good set of results, we raise our FY21-FY23 earnings estimates by 7% p.a.. Both on and off-trade sales volume is expected to remain robust on the back of festive celebrations in the coming quarters. Separately, we are still unsure of when on-trade channels with liquor licenses (i.e. clubs & entertainment centres) will be allowed to reopen.