Blue Moon: New Channels to Fuel Top-Line Growth but Expenses to Stay Elevated

We review our assumptions for narrow-moat Blue Moon before the release of its 2024 interim results. Our five-year revenue compound annual growth rate for Blue Moon rises to 7% from 5%, as we believe penetration in livestreaming platforms could accelerate its sales growth. However, the net profit CAGR in our explicit forecast period is only raised to 20.3% from 20.1%, as we factor in higher selling, general, and administrative, or SG&A, expenses. Hence, we retain our fair value estimate at HKD 2.80 per share, implying 41 times 2024 price/earnings and 20 times enterprise value/EBITDA. Despite trading at a 25% discount to our fair value estimate, we think investors would remain sidelined until the firm’s channel expansion efforts are proven to deliver improvements to its bottom line.