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Multi Bintang (MLBI IJ) is Indonesia’s leading beer producer.
The company started in 1929 as “Nederlandsch-Indische Bierbrouwerijen” back when Indonesia was a Dutch colony. Today, Multi Bintang has a market share of almost 60%. Its flagship beer “Bintang Bir” is by far the most popular brand in the sector.
The company is majority-owned by Heineken, which runs it like a local subsidiary. 100% of profits are paid out as dividends. The management team has a background in other subsidiaries of the broader Heineken group. For example, the current CEO previously ran Heineken in Myanmar and Mongolia.
Indonesia is a peculiar beer market. The majority of the population is Muslim and don’t drink alcohol. That limits the potential upside in overall beer consumption. That said, neighbouring country Malaysia consumes almost 6x as much per capita as Indonesia. And in Malaysia, Islam is the state religion whereas Indonesia has a secular constitution. The numbers clearly show that Indonesian beer remains a growth market, and even more so if you include alcohol-free beer.
Beer consumption dropped significantly during the pandemic as tourism was brought to a halt and nightlife venues closed. But the latest Delta wave of COVID-19 infections has now died down. There are early signs that restrictions will be easing. For example, Bali just announced that it will reopen for international travellers on 14 October 2021.
Multi Bintang has among the lowest valuation multiple of any beer producer in Asia, even on consensus numbers. Assuming a multiple of 20x 2024e EPS, the stock would likely trade at IDR 12,800 per share, in which case the upside would be +53%.
A risk to the case would be a blanket ban on alcohol production and consumption. Such a bill came up in the parliament in 2016 and has now resurfaced again. But the bill only seems to have support from one Islamic party, which has roughly 5% of the votes. The bill was pushed by lawmakers representing only 4% of total votes. The bill does not seem to have broad support. I put the probability of a blanket ban at less than 10%.
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Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may from time to time have positions in the securities covered in the articles on this website. Full disclosure: I do hold a position in Multi Bintang at the time of publishing this article. This is disclosure and not a recommendation to buy or sell.
