Malaysia: Major brewers expected to record stronger sales volumes in Q4

CGS-CIMB Research, in a note on September 10, said the positive sales outlook is backed by a gradual reopening of economic activities and higher vaccination rates, as well as higher on-trade sales with consumers allowed to dine in.

Further, the government's green to hold mass gathering events such as weddings and events will be the key drivers for beer sales.

Both CBM and HMB have resumed their brewery operations since 16 August after an 11-week suspension to comply with the full movement control order (FMCO).

This is in line with government initiatives to allow manufacturers with fully vaccinated employees to operate.

"We gather that more than 80 per cent of both brewers' employees have been fully vaccinated, which means the brewers are allowed to operate at full capacity in Phases 1 and 2 of the current Movement Control Order (MCO)," the research firm said.

Since the Covid-19 pandemic began in March 2020, both CBM and HMB have focused on increasing operating efficiencies.

This is via various efforts, including digitalisation and streamlining of operations, including headcount optimisation.

With these cost containment exercises since the first MCO, the research firm noted that both CBM and HMB should benefit from margin expansion in the long term.

In addition, both brewers have stated plans to raise their products' selling prices further.

"Despite mainly passing on higher raw material costs, we expect the quantum of price increases to be more than sufficient, leading to better margins," CGS-CIMB Research said.

"While we have Add calls on both brewers, we prefer CBM over HMB.

"This is premised on an expected stronger recovery in CBM's sales given its exposure to the Singapore market and strong traction in its premium beer segment, leading to a more profitable sales mix.

Despite the impact of Covid-19 in the first half (1H) 2021, CBM's premiumisation strategy is paying dividends as it recorded a 16 per cent year-on-year (YoY) growth in premium beer sales, despite its core beer sales declining 11 per cent YoY in the same period, CGS-CIMB said.

"We upgrade the sector to Overweight from Hold as we believe that the worse is over. We also expect brewers to record stronger results from Q4 2021 backed by recovery in beer sales, with the gradual reopening of economic activities, and better consumer sentiment from higher vaccination rates as well as better cost efficiencies," the research firm said.