Heineken Malaysia – Results Review: 2QFY25
Hong Leong Investment Bank
HLIB Research
PP 9484/12/2012 (031413)
18 August 2025
Results Review: 2QFY25
Sam Jun Kit
jksam@hlib.hongleong.com.my
+603-2083 1723
BUY (Maintain)
Target Price: RM27.14
Previously: RM35.56
Current Price: RM23.20
Capital upside 16.9%
Dividend yield 5.6%
Expected total return 22.5%
Sector coverage: Consumer
Company description: Heineken Malaysia produces, packages, markets and distributes beer under brands of Guinness, Heineken and more.
Heineken Malaysia
Share price
RM Pts
HEIM (LHS) 30.0 KLCI (RHS) 1800
25.0 1700
20.0 1600
15.0 1500
10.0 1400
5.0 1300
0.0 1200
Aug-24 Oct-24 Jan-25 Mar-25 May-25 Aug-25
Historical return (%) 1M 3M 12M
Absolute -3.5 -18.3 -0.3
Relative -6.6 -18.5 2.7
Stock information
| Bloomberg ticker | HEIM MK |
|---|---|
| Bursa code | 3255 |
| Issued shares (m) | 302 |
| Market capitalisation (RM m) | 7,009 |
| 3-mth average volume (‘000) | 121 |
| SC Shariah compliant | No |
| F4GBM Index member | Yes |
| ESG rating | ★★★★ |
Major shareholders
| GAPL | 51.0% |
|---|---|
| Virtus Investment Partners Inc | 3.4% |
| OCBC | 3.0% |
Earnings summary
| FYE (Dec) | FY24 | FY25f | FY26f |
|---|---|---|---|
| PATMI – core (RM m) | 447.9 | 443.0 | 468.0 |
| EPS – core (sen) | 148.3 | 146.6 | 154.9 |
| P/E (x) | 15.6 | 15.8 | 15.0 |
A miss
Heineken reported 1H25 core net profit of RM206.0m (-3.7% YoY), which came in below our and consensus expectations. The negative surprise is mainly attributed to weaker-than-expected margin performance in 2Q25, driven by higher costs associated with ongoing digital infrastructure investments. While management has not explicitly confirmed if these costs will persist into the second half of 2025, they have characterized the initiative as an ongoing process to improve operational efficiency, suggesting that related expenses may continue. As a result of the earnings miss, we revise our FY25F/26F/27F EPS forecasts lower by 5%/4%/4%, respectively. Additionally, we have applied a more conservative valuation metric, pegging Heineken’s P/E at -0.5 SD to its 5-year mean, resulting in a lower TP of RM27.14 (from RM35.56) based on 18x mid-FY26F P/E.
Below expectations. Heineken’s 2Q25 core PATAMI came in at RM83.1m (-32.4% QoQ, -9.0% YoY), bringing 1H25 core earnings to RM206.0m (-3.7% YoY). The results fell short of both our and consensus expectations, accounting for only 44% of the respective full-year forecasts. The earnings miss was primarily attributed to weaker-than-expected margin performance in 2Q25, driven by higher costs associated with ongoing digital infrastructure investments. 1H25 core PATAMI was arrived at after adjusting for EIs (i.e. loss on disposal of PPE, unrealized forex loss and etc) amounting to -RM800k.
Dividend. Declared first interim DPS of 40 sen (2Q24: 40 sen), which goes ex on 8 October 2025. 1H25 DPS amounted to 40 sen vs 1H24’s 40 sen.
QoQ. Top line decreased 29.3% due to the high base effect from last quarter’s Chinese New Year festive season. The decrease in sales was generally in line with Carlsberg’s 25% decline in its Malaysia operations. Notably, higher expenses were recorded this quarter, which led to a 0.9ppt erosion in EBIT margin, as the group continued to invest in commercial initiatives and its digital infrastructure. We understand that the group is currently implementing Heineken’s Digital Backbone (DBB) and Eazle platforms to enhance operational efficiency and order management. Given the higher cost base, PAT declined at a steeper rate of 32.4%.
YoY. Sales were impacted by cautious consumer sentiment, resulting in a 4.6% YoY decline. Management noted an increasing shift towards the off-trade sales mix, which was partially offset by weaker on-trade performance, particularly within the bar segment. Adding to the pressure, higher costs related to ongoing digital infrastructure investments further weighed on earnings, leading to a 9.0% YoY decline in core PAT.
YTD. The shorter Chinese New Year period in 2025, coupled with weaker sales performance in 2Q25, led to a 3.8% decline in group sales. In turn, core PAT declined by -3.7%.
Outlook. Following Heineken’s announcement of a 2%-8% beer price increase (effective 1 August for the on-trade channel and 1 September for the off-trade channel) we expect some frontloading of volumes in the upcoming quarter, in line with previous patterns. While the financial impact of past price increases on brewers has generally been neutral rather than negative, supported by relatively inelastic demand (Heineken: 0.94), Heineken’s ongoing spending in digital infrastructure could weigh on Heineken’s near-term profitability. Although management has not explicitly confirmed whether these costs will continue into 2H25, it has characterized the initiative as an ongoing process to improve operational efficiency – suggesting that related expenses may persist beyond the current period. Separately, regulatory headwinds remain a key risk, with the government recently extending the pro-health tax to brewers and expressing support for a potential increase in cigarette taxes.
Financial Forecast
All items in (RM m) unless otherwise stated
Balance Sheet
| FYE Dec | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Cash | 43.3 | 32.5 | 98.4 | 190.8 | 309.3 |
| Receivables | 433.6 | 450.5 | 448.2 | 468.4 | 489.4 |
| Inventories | 120.6 | 152.1 | 152.5 | 159.4 | 166.6 |
| PPE | 576.5 | 582.1 | 574.9 | 564.7 | 551.6 |
| Others | 73.5 | 63.0 | 61.1 | 58.9 | 56.4 |
| Assets | 1,247.4 | 1,280.2 | 1,335.1 | 1,442.2 | 1,573.3 |
| Payables | 610.3 | 632.8 | 634.5 | 663.1 | 693.2 |
| Debt | 135.0 | 81.0 | 81.0 | 81.0 | 81.0 |
| Others | 43.5 | 27.0 | 27.0 | 27.0 | 27.0 |
| Liabilities | 788.8 | 740.9 | 742.5 | 771.2 | 801.2 |
| Shareholder’s equity | 458.7 | 539.3 | 592.6 | 671.0 | 772.1 |
| Minority interest | |||||
| Equity | 458.7 | 539.3 | 592.6 | 671.0 | 772.1 |
Income Statement
| FYE Dec | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Revenue | 2,637.7 | 2,796.8 | 2,805.2 | 2,931.4 | 3,063.3 |
| EBITDA | 593.3 | 687.1 | 657.8 | 691.8 | 722.0 |
| EBIT | 518.3 | 595.7 | 586.0 | 616.9 | 644.1 |
| Finance cost | (8.6) | (12.6) | (4.1) | (4.1) | (4.1) |
| Finance Income | 1.2 | 1.2 | 1.0 | 3.0 | 5.7 |
| Profit before tax | 510.9 | 584.3 | 582.9 | 615.8 | 645.8 |
| Tax | (124.1) | (117.6) | (139.9) | (147.8) | (155.0) |
| Reported PAT | 386.8 | 466.7 | 443.0 | 468.0 | 490.8 |
| Exceptionals | (18.8) | ||||
| Core PAT | 386.8 | 447.9 | 443.0 | 468.0 | 490.8 |
| Concensus | 465.0 | 493.0 | 512.0 | ||
| HLIB/Concensus | 95% | 95% | 96% |
Cash Flow Statement
| FYE Dec | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Profit before taxation | 510.9 | 584.3 | 582.9 | 615.8 | 645.8 |
| D&A | 75.0 | 91.3 | 74.1 | 77.4 | 80.7 |
| Working capital | 135.1 | (41.9) | 3.6 | 1.6 | 1.7 |
| Taxation | (151.2) | (126.3) | (139.9) | (147.8) | (155.0) |
| Others | 14.3 | 5.2 | |||
| CFO | 584.1 | 512.6 | 520.7 | 547.0 | 573.2 |
| Capex | (139.1) | (78.3) | (65.0) | (65.0) | (65.0) |
| Others | 1.4 | 1.3 | |||
| CFI | (137.7) | (77.0) | (65.0) | (65.0) | (65.0) |
| Dividends | (416.9) | (386.7) | (389.7) | (389.7) | (389.7) |
| Others | (38.8) | (59.8) | |||
| CFF | (455.7) | (446.5) | (389.7) | (389.7) | (389.7) |
| Net cash flow | (9.2) | (10.8) | 65.9 | 92.3 | 118.5 |
| Begnning Cash | 52.6 | 43.3 | 32.5 | 98.4 | 190.8 |
| Ending Cash | 43.3 | 32.5 | 98.4 | 190.8 | 309.3 |
Valuation & Ratios
| FYE Dec | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Core EPS (sen) | 128.0 | 148.3 | 146.6 | 154.9 | 162.5 |
| P/E (x) | 18.1 | 15.6 | 15.8 | 15.0 | 14.3 |
| EV/EBITDA (x) | 12.0 | 10.3 | 10.6 | 10.0 | 9.4 |
| DPS (sen) | 128.0 | 129.0 | 129.0 | 129.0 | 129.0 |
| Dividend yield (%) | 5.5 | 5.6 | 5.6 | 5.6 | 5.6 |
| BVPS (RM) | 1.5 | 1.8 | 2.0 | 2.2 | 2.6 |
| P/B (x) | 15.3 | 13.0 | 11.8 | 10.4 | 9.1 |
| EBITDA margin | 22.5% | 24.6% | 23.4% | 23.6% | 23.6% |
| EBIT margin | 19.6% | 21.3% | 20.9% | 21.0% | 21.0% |
| PBT margin | 19.4% | 20.9% | 20.8% | 21.0% | 21.1% |
| Net margin | 14.7% | 16.0% | 15.8% | 16.0% | 16.0% |
| ROE | 84.3% | 83.1% | 74.8% | 69.8% | 63.6% |
| ROA | 31.0% | 35.0% | 33.2% | 32.5% | 31.2% |
| Net gearing | 20.0% | 9.0% | CASH | CASH | CASH |
Quarterly results comparison
| FYE Dec (RM m) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | 1H24 | 1H25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 565.5 | 763.6 | 539.7 | -29.3% | -4.6% | 1,354.7 | 1,303.4 | -3.8% |
| Operating expenses | -444.1 | -599.6 | -428.9 | -28.5% | -3.4% | (1,067.8) | (1,028.5) | -3.7% |
| EBITDA | 143.9 | 190.8 | 133.6 | -30.0% | -7.2% | 330.6 | 324.4 | -1.9% |
| EBIT | 121.4 | 164.0 | 110.8 | -32.4% | -8.7% | 286.9 | 274.8 | -4.2% |
| Finance cost | -1.4 | -3.1 | -1.4 | -54.6% | 0.8% | (5.6) | (4.5) | -20.6% |
| PBT | 120.0 | 160.9 | 109.4 | -32.0% | -8.8% | 281.3 | 270.3 | -3.9% |
| Reported PAT | 91.1 | 122.2 | 83.0 | -32.1% | -8.9% | 213.6 | 205.2 | -4.0% |
| Core PAT | 91.3 | 122.9 | 83.1 | -32.4% | -9.0% | 213.8 | 206.0 | -3.7% |
| EPS (sen) | 30.2 | 40.4 | 27.5 | -32.1% | -8.9% | 70.7 | 67.9 | -4.0% |
| Core EPS (sen) | 30.2 | 40.7 | 27.5 | -32.4% | -9.0% | 70.8 | 68.2 | -3.7% |
| ppts | ppts | ppts | ||||||
| EBITDA margin (%) | 25.4 | 25.0 | 24.7 | -0.2 | -0.7 | 24.4 | 24.9 | 0.5 |
| EBIT margin (%) | 21.5 | 21.5 | 20.5 | -0.9 | -0.9 | 21.2 | 21.1 | -0.1 |
| PBT margin (%) | 21.2 | 21.1 | 20.3 | -0.8 | -0.9 | 20.8 | 20.7 | 0.0 |
| PAT margin (%) | 16.1 | 16.1 | 15.4 | -0.7 | -0.7 | 15.8 | 15.7 | 0.0 |
| Effective tax rate (%) | 23.9 | 23.7 | 24.1 | 0.4 | 0.1 | 24.0 | 23.8 | -0.2 |
HLIB
ESG Snapshot
| F4GBM Index member | : No |
|---|---|
| FTSE Russell ESG rating | : ★★★★ |
| MSCI ESG rating | : None |
The goal of this section is to provide an overview of Heineken ESG trends and developments. Information presented here are from financial year FY24 and will only be updated when new data are available. Overall, we find Heineken has no glaring ESG issues as most indicators met expectations and were in line with sector’s performance.
Environmental (E) indicators
- Target to achieve net zero carbon emissions by 2040 (FY22: 36% reduction against 2022 baseline)
- Committed to achieve zero waste to landfill by 2025 (FY23: 0% waste to landfills since 2017)
- Total carbon emissions stood at 6.8k tCO2e (vs 2023: 7.6k; below Carlsberg’s 15.9k)
- Electricity consumption stood at 9.1 kWh/hl (vs 2023: 9.3kWh/hl; below Carlsberg’s 9.5kWh/hl)
- Water consumption for per hl of beer was at 3.0 hl (vs 2023: 3.4hl; in line with Carlsberg’s 2.9/hl)
- Under the W.A.T.E.R Project, targets to replenish 1.5 litres of water for every 1 litre used in its products.
Comments: Heineken stands out vs Carlsberg given better numbers in terms of total carbon emissions and electricity consumption. Additionally, Heineken’s water balancing initiative appears notably more proactive, setting it apart in the area of water management.
Social (S) indicators
- Has a talent retention rate of 93% in 2024 (vs 2022: 93%; below Carlsberg’s 97%)
- Average training hours per employee was at 40 hours (vs 2023: 37)
- Composition of female Board of Directors stood at 43% (vs 2023: 43%; above Carlsberg’s 29%)
- Female accounted for 38% of senior management team (vs 2023:43%; below Carlsberg’s 44%)
- Zero work-related fatality and 3 lost time injuries (vs FY23: 0 and 2 lost time injuries)
- Dedicated at least 10% of its annual media spending to promote responsible consumption campaigns
Comments: We like the company’s initiative of dedicating 10% of its media spend to promote responsible consumption through campaigns and promotional activities. This measure is particularly noteworthy because it sets Heineken apart from its competitor who has not taken a similar approach. On a similar note, we applaud the high composition of females in Heineken’s BoD, which is above Carlsberg’s 29% and MCCG’s 30% standard.
Governance (G) indicators
- Board size of 7 directors (vs FY22: 7 directors) where 43% were independent (vs FY23: 43%) with an average tenure of 3.7 years (above Carlsberg’s 3.3years). Meeting attendance was 94% (vs FY23: 94%; below Carlsberg’s 100%).
- Independent directors form 66% / 66% / 60% of audit / risk / nomination & remuneration committee (vs FY23: 66% / 66% / 60%; Carlsberg: 66% / 66% / 66%).
- The percentage of executive & non-executive directors pay to total income stood at 0.2% (vs FY23: 0.2%; in line with Heineken’s 0.2%)
Comments: We assess that there are no issue on independence and BOD tenure of service. On a similar note, the compensation package for executive & non-executive directors appeared to be similar with Carlsberg.
Bursa, HLIB Research
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Stock rating definitions
| BUY | Expected absolute return of +10% or more over the next 12-months. |
|---|---|
| HOLD | Expected absolute return of -10% to +15% over the next 12-months. |
| SELL | Expected absolute return of -10% or less over the next 12-months. |
| UNDER REVIEW | Rating on the stock is temporarily under review which may or may not result to a change from the previous rating. |
| NOT RATED | Stock is not or no longer within regular coverage. |
Sector rating definitions
| OVERWEIGHT | Sector expected to outperform the market over the next -12 months. |
|---|---|
| NEUTRAL | Sector expected to perform in-line with the market over the next -12 months. |
| UNDERWEIGHT | Sector expected to underperform the market over the next -12 months. |
The stock rating guide as stipulated above serves as a guiding principle to stock ratings. However, apart from the abovementioned quantitative definitions, other qualitative measures and situational aspects will also be considered when arriving at the final stock rating. Stock rating may also be affected by the market capitalisation of the individual stock under review.
