The brewery business is a niche sector in the food and beverage
business. People might tend to overlook it since the products
manufactured by them are only for those aged 18 and above (depending on
each country's age limit).
But still, it is a lucrative business nonetheless. Especially in Malaysia, where there are only two licensed breweries. Heineken Malaysia Berhad and Carlsberg Brewery Malaysia Berhad.
But to choose the best among the two, which one would be an investor's choice, rather than a drinker's choice 1. Revenue
Both companies are neck-to-neck when it comes to sales. But Heineken
Malaysia inched out more sales compared to Carlsberg Malaysia in latest
the fiscal year 2018. However, in the latest 3 trailing quarters,
Carlsberg Malaysia actually is turning the tide around, recording RM
1.683 billion revenue versus Heineken Malaysia, who is a little behind
at RM1.64 billion. Verdict: Very close call, but we have to give Carlsberg Bhd the
win for potentially pipping Heineken Bhd to recording higher revenue. 2. Net Profit
Net profit-wise, Heineken Bhd recorded an operating profit of RM 283
million versus Carlsberg Bhd, who again edged out a win with a profit of
RM 287 million.
However, it is worth noting that Carlsberg Bhd has an investment stake
in Lion Brewery, a brewery operating in Sri Lanka. As of 2018, the
profit contribution of Lion Brewery to Carlsberg Malaysia's total profit
amounted to RM 21 million. So by stripping off the RM 21 million and
compare just the Malaysian operations, Heineken Malaysia actually
achieved a better report card in terms of profits. Verdict: Very close call, but we have to give Carlsberg Bhd the
win for potentially pipping Heineken Bhd to recording higher profits
this time around! Plus point too for having an investment in another
growing region. 3. Gross Operating Margin
Both companies are pretty close. Carlsberg Bhd yet again pipping
Heineken Bhd by a marginal win. A higher gross margin means Carlsberg
Bhd is actually more cost-competitive than Heineken Bhd. Historically,
Carlsberg Bhd has proven to be consistently more cost-competitive than
Heineken Bhd. Verdict: Carlsberg Bhd takes it home again with a marginal win over Heineken Bhd 4. Dividends Per Share
Both companies are quite close too in dividends paid out per share.
This time around, Heineken Bhd is more generous, with a trailing
dividend per share of RM0.94 versus Carlsberg Bhd which has a trailing
dividend per share of RM0.91. Both companies actually pay out almost
100% of their earnings as dividends, so they are really a dividend
investor's favourite. Verdict: It is a tie since both companies are dividend
powerhouses. To award Heineken Bhd a win with a marginal 3 cents
dividend isn't that much justified. 5. Valuation - Price to Earnings and Dividend Yield
Both companies are trading at a price to earnings ratio ranging from 25
times to 31 times. Heineken Bhd appears to be cheaper by a little bit.
Dividend yield wise Heineken Bhd also pips Carlsberg by a bit. Verdict: Straight forward win for Heineken Bhd
MyKayaPlus Wrap-Up
Remember our Ultimate Glove Maker comparison
where we compare 4 of Malaysia's biggest glove makers? In that article,
the cheapest company in valuation turn out to be the smallest, which
justifies the lower valuation.
In this case, however, both Heineken Bhd and Carlsberg are equally big
and well managed. So even though Carlsberg may have many winning points,
valuation wise it is 20% more than its competitor Heineken Bhd.
Personally we do not think the gap should be that big. So, by comparison, Carlsberg bhd is indeed on the higher side.
Would you invest in either company? Let us know in the comments section below.
Need more info on Carlsberg Brewery Malaysia Bhd? Check out our in-depth report here
Need more info on Heineken Malaysia Bhd? Check out our in-depth report here
DISCLAIMER
The information available in this article/report/analysis is for
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