Economy Downturn and Heineken Malaysia

I read some news recently that highlighted the solid profit performance registered by Heineken Malaysia (formerly known as Guinness Anchor Berhad) in the 4Q 2016 and its 18-month performance from July 2015 to end-December 2016.

I am always amazed by the decent performance posted by the company despite endless reporting on economic downturn, rising cost of living, weak Ringgit  and many more. But people still keep calm and drink, hence contributing to rising sales of Heineken Malaysia.

For the 18-month ended December 2016, Heineken Malaysia chalked up a revenue of RM2.8 bil, up 5% from RM2.67 bil over the corresponding period. In terms of profit before tax, it was up by 11% from RM495 mil to RM549 mil. 

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The solid performance could be due to early timing of CNY, better efficiency and strong sales in its distribution channel. 

From my observation when I visited Penang recently, I also noticed that tourist from Japan and China drink Heineken too, they would have contributed to the stronger sales.

Heineken Malaysia proposed 60 sen dividend per share to be paid out in May 2017 subject to approval, translating into 3.6% yield based on latest share price of RM16.8. For the full 18-month ending December 2016, total payout would have been around 145 sen if the 60 sen is approved, translate into good dividend yield of 8.6% based on latest share price.

Investor who bought into Heineken Malaysia at much earlier time frame would have locked in higher dividend yield.

Despite the good performance, we still need to watch out for  the potential impact of RM56 mil in excise & sales tax claim by Custom Malaysia back in 2015, of which Heineken Malaysia is still engaging with the authority.

With Dato Sri Idris Jala assuming the post of chairman, it will be interesting to monitor the development of this cash cow moving forward.

For now, the party appears to be still on for the brewer.

Can We Follow Analyst's Recommendation Blindly?

One of the greatest mistakes I made when I embarked on equity investment some years ago is basically lack of independent thinking.

I used to read analyst's stock recommendation report and bought the shares accordingly without further due diligence. The end result?

 I lost money in Masterskill shares when I blindly follow the analyst's BUY recommendation. 

Lesson learnt!

Nevertheless, do you like to drink Starbucks or dine at Kenny Rogers Roasters?

Starbucks and Kenny Rogers are some of the businesses owned by Berjaya Food Berhad. Share price was performing well from 2012 to 2014, brought cheers to many shareholders.

Following the surge in share price in second half 2014 due to acquisition of remaining stake in Starbuck Malaysia to make it a wholly-owned subsidiary, investors who were excited and follow stock recommendation of certain bank-backed research house, would have realised close to 50% in capital loss.

During the share price downtrend from early 2015 onwards, the analyst maintained BUY recommendation on Berjaya Food despite poor business performance at Kenny Rogers segment which dragged the Group's consolidated financial performance. Subsequently, the recommendation was changed to HOLD.

Those who bought and follow blindly (like I used to), would have sufferred losses. Hence, always train to think independently, always question the recommendation and question our thinking process to minimize mistake and optimize returns.

Analyst reports are useful to some extents, but do not follow the recommendation blindly!