PETALING JAYA: CGS International Securities Malaysia (CGSI) expects Heineken Malaysia Bhd to step up capital spending this year as it prepares to support production relocated from Singapore, but says weak consumer sentiment and elevated input costs will continue to weigh on earnings.
The research house raised its FY26 capital expenditure forecast by 47% to reflect management’s plan to build a new production line to meet future demand following the relocation of production from Singapore.
Despite the expansion, CGSI downgraded the brewer to “Hold” from “Add” and lowered its target price to RM19.83, after cutting its FY26, FY27 and FY28 earnings forecasts by 37.8%, 31.9% and 21.7%, respectively.
“We remain cautious on the H2’26 outlook given persistently weak consumer sentiment, continued softness in the on-trade channel and elevated raw material and packaging costs,” the research house said.
The downgrade came after Heineken’s first-half 2026 earnings missed expectations. Net profit for the six months ended June 30 fell 24.5% year-on-year to RM155 million, representing 31.4% of CGSI’s full-year forecast and 34% of Bloomberg consensus estimates.
Second-quarter net profit declined 39.1% year-on-year to RM50.5 million, while revenue fell 19.5% amid weaker consumer sentiment and continued inventory management by distributors.
CGSI said management also highlighted a shift in consumer behaviour from on-trade consumption at bars and restaurants to off-trade purchases, adding further pressure on sales volumes.
Meanwhile, EBITDA margin narrowed by 3.7 percentage points year-on-year to 21% in the second quarter, mainly due to higher raw material and packaging costs, particularly aluminium, as supply chain disruptions linked to escalating hostilities in the Middle East pushed prices higher.
Despite the weaker performance, Heineken declared an interim dividend of 40 sen per share, equivalent to a payout ratio of 78% for the first half.
CGSI said it sees limited near-term re-rating catalysts despite the stock trading at 16.1 times its projected FY27 earnings and offering an estimated dividend yield of 6.1%.
It added that potential downside risks include an excise duty hike under Budget 2027, weaker alcohol demand and slower tourist arrivals, while stronger consumer spending, easing raw material costs and higher export volumes to Singapore could support earnings.
