Business and Finance

Heineken (HEIN.AS: Quote, Profile, Research, Stock Buzz) shares have fallen by almost a third this year as investors punish the Dutch brewer for its heavy exposure to mature Western markets, but analysts see the weakness as overdone given good long-term prospects for premium brand beers.

The credit crisis, waning consumer confidence and smoking bans have all taken their toll on beer sales in Western Europe and the United States, but the thirst for trendy, pricier brands — among which Heineken is one of the most universally recognized — remains strong.

While the world’s third-largest brewer works to integrate assets it acquired from Britain’s Scottish & Newcastle (S&N) and struggles to absorb higher input costs, the discount its shares now offer to peers such as Carlsberg (CARLb.CO: Quote, Profile, Research, Stock Buzz) and InBev (INTB.BR: Quote, Profile, Research, Stock Buzz) could provide a buying opportunity even if top-line growth rates may look less than impressive for now.

Analyst Marcel Hooijmaijers at Landesbanki/Kepler, who rates the stock a “buy” despite having slashed his target share price to 37 euros from 54 euros, said the stock trades at a discount of about 20 percent compared to other major brewers.

“A certain discount is justified given the more favorable emerging market profile of other brewers,” but he adds: “A 10 percent discount to the sector seems more justified than the current 20 percent.”

This makes the stock attractive at current levels of around 32 euros, giving Heineken a market value of 15.4 billion euros ($23 billion) guaranteed approval cash advance loans. The share closed on Friday at 31.88 euros.

Heineken trades at around 13.7 times projected 2009 earnings compared to 15.1 for Carlsberg, 14.2 for InBev (INTB.BR: Quote, Profile, Research, Stock Buzz), maker of Stella Artois and Beck’s, and 15.8 for Diageo (DGE.L: Quote, Profile, Research, Stock Buzz), which owns Guinness, according to Reuters data.

Last week, Heineken warned that declining consumer confidence had cast doubt on whether its acquisition of S&N assets would benefit its earnings in 2009. The brewer is set to report first-half results on August 27. 

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