Blue Moon Issues Profit Warning for H1 2022; Retaining FVE due to Unchanged Longer-Term Growth Path

Narrow-moat Blue Moon issued a profit warning indicating an expected net loss of HKD 132.9 million in the first half of 2022. While management indicated the loss was primarily caused by the translational losses of cash denominated in U.S. and Hong Kong dollars, we note the pull forward in selling, general, and administrative expenses, or SG&A, has likely led to a larger operating loss than in first-half 2021, despite stronger revenue growth and higher gross profit. We lowered our gross and net margin estimates for the full year and expect a low-single-digit year-on-year decline in 2022 net income (versus low-double-digit growth in prior forecasts); but we believe Blue Moon could monetize on channel investments in the first half and deliver stronger operating results in second-half 2022. A higher gross profit in first-half 2022 could have served as a cushion for investments in future growth.