Breweries stocks remain sober amid new hard liquor regulations

The announcement also left Bursa Malaysia’s CPI little changed at 509.29 points

by PRIYA VASU / pic by BLOOMBERG

THE imposition of new hard liquor regulations by Kuala Lumpur City Hall (DBKL) is expected to have a minimal impact on the earnings of local breweries and general retail store operators due to the small volumes involved.

DBKL in a statement said sundry and grocery shops, convenience stores and Chinese medicine shops in KL will not be allowed to sell hard liquor starting Oct 1 next year.

“We are neutral on this development. Malaysia’s hard liquor volumes are small and the impact on both convenience stores and breweries is expected to be minimal,” said Maybank Investment Bank Bhd’s Jade Tam.

The investment bank maintains a negative view on the consumer sector in expectations of a prolonged weak consumer sentiment due to lower disposable income in light of the negative impacts of Covid-19.

For the listed convenience store players, earnings impact is expected to be minimal for both 7-Eleven Malaysia Holdings Bhd (Buy, target price [TP]: RM1.52) and MyNews Holdings Bhd (Sell, TP: 57 sen) as alcohol sales are estimated to account for less than 10% of their respective revenues.

7-Eleven, which has 2,400 stores nationwide, was unchanged yesterday at RM1.34 and MyNews, with 530 outlets, closed at at 64 sen, also unchange.

Tam does not foresee any meaningful earnings impact on brewery companies such as Carlsberg Brewery Malaysia Bhd and Heineken Malaysia Bhd.

Carlsberg closed eight sen lower at RM22.42, while Heineken closed 46 sen lower at RM21.54.

The announcement also left Bursa Malaysia’s Consumer Products Index (CPI) little changed at 509.29 points. Bursa’s CPI members have a total market capitalisation of RM246.7 billion.

The new regulations stated that effective Oct 1, 2021, hard liquor will no longer be allowed to be sold at general retail and Chinese medicine stores with the exception of it being used for traditional medicinal purposes.

General retail stores include both grocery and convenience stores, and hard liquor licence renewals at these premises will only be allowed up till Sept 30, 2021.

Based on the announced guidelines by DBKL, hard liquor sales will also be restricted to a set period of time between 7am to 9pm for all general retail stores until the new regulations come into force on Oct 1, 2021.

Other business establishments such as restaurants, pubs, bars and beer houses will also be limited to 10am to midnight for any hard liquor sales.

Certain businesses will be allowed to apply for an extension to this window of time subject to the nature of its business activities and zoning regulations.