Malaysia: Brewers likely to be negatively affected by latest mandatory control order

Brewers are likely to be negatively affected by the implementation of the latest mandatory control order (MCO), particularly in terms of lower malt liquor market (MLM) volume, the Star Online reported on January 21

CGS-CIMB Equities Research, in a report, said each fortnight of the MCO would negatively impact its financial year (FY) 2021 earnings per share (EPS) forecasts for Carlsberg Brewery Bhd and Heineken Malaysia Bhd by 3.2% and 5.9%, respectively.

“In our view, Carlsberg will be less impacted versus Heineken, given that 26.7% of the former’s revenue (nine months 2020) is derived from its Singapore operations (bulk of Heineken’s revenue is derived locally).

“We have yet to account for this in our FY21 EPS for both companies, pending further updates on the length of the implementation of MCO,” the house said.

Despite the expected near-term weakness in MLM volume, CGS-CIMB Research believed that long-term demand for beer would remain inelastic in the country.

This is backed by its attractiveness in terms of better affordability among consumers due to its lower price points versus other premium alcohol products, such as wine or spirits. Also, beers are widely available, as they are sold in more off-trade and on-trade locations such as coffee shops and food courts, the research house pointed out.

While operations of brewers are allowed to continue during the MCO, the measures implemented during this period should lead to lower MLM sales, the research house said.

23 January, 2021