Malaysia: Beer sector expected to benefit from tourism recovery
Brewers in Malaysia are expected to benefit from a boost in beer consumption fuelled by tourism recovery, the New Straits Times reported on January 4.
"We have BUY ratings on both the brewers as we opine they offer exposure to the tourism recovery angle which still has legs to go. Between the two – Carlsberg Malaysia Bhd (target price (TP): RM30.31) and Heineken Malaysia Bhd (TP: RM29.94) – we favour the former for exposure," Hong Leong Investment Bank Bhd research (HLIB research) said in its note.
The lower prices of tin and barley are also expected to contribute to a more favourable margin outlook for brewers upon the renewal of fixed-price contracts.
The firm has an Overweight rating on the sector.
"With the anticipation of reduced cost pressures, we do not foresee a significant increase in beer average selling price (ASP) that could potentially impact consumer demand," HLIB research said.
In the first eight months of 2023, foreign tourist arrivals in Malaysia reached 13.0 million, putting the nation on track to meet its 2023 target of 18 million (+79.7 per cent year-on-year (YoY) set by Tourism Malaysia.
HLIB research said while this trajectory is encouraging, it remains notably below the pre-pandemic level of 26.1 million in 2019, offering further upside recovery potential.
"A key driver for further growth lies in the potential recovery of Chinese tourist arrivals, currently constituting a modest 5.4 per cent of total tourists in Malaysia. This figure, which is still below the pre-pandemic range of 8.8-11.9 per cent, is poised for further recovery, propelled by Malaysia's move to introduce a 30-day visa-free travel policy for Chinese and Indian visitors starting December 2023," it added.
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