Thai Beverage - RHB Invest 2017-07-03: Everything Seems Better After A Little More Beer

Thai Beverage - RHB Invest 2017-07-03: Everything Seems Better After A Little More Beer THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Everything Seems Better After A Little More Beer

  • Based on the latest statistics released by the Bank of Thailand, beer sales volume in the Kingdom has registered an increase of 5% and 10% YoY in April and May 2017 respectively. 
  • We think this is a signal that beer consumption pattern in Thailand has normalised post-Songkran festival and the mourning effects on beer sales are behind us. We expect the recovery to continue from here on. 
  • Reiterate BUY on ThaiBev with an SOP-derived Target Price of SGD1.10 (22% upside).



Positive signs in beer consumption. 

  • Thailand’s volume of beer sales has registered positive YoY growth of 5% and 10% in April and May 2017 respectively. This is a stark turnaround from the 17% decline YoY in October 2016, immediately after the passing of the late King. Currently with two consecutive months of positive growth, we believe beer consumption has normalised post-Songkran and that the worst is behind us.
  • We expect 2H17 to continue to see positive growth in beer volumes. According to management, Thai Beverage (ThaiBev) has maintained its 40% market share in the beer segment as at April 2017. As such, we expect ThaiBev’s beer segment to perform in line with the market.


Restocking of spirits to return. 

  • While there is no market data released on spirits, we believe the recovery in beer consumption can be seen as a proxy for the consumption of spirits also. We anticipate the decline in spirit volumes to dissipate in 2H17. 
  • In addition, we note that agents stock up on spirits inventories in anticipation of a tax hike during January-March 2016, which resulted in strong sales number for ThaiBev in 2Q16. We expect a similar restocking phase by agents given that the new excise tax is scheduled to be implemented in September 2017.


The worst is over, reiterate BUY

  • The worst is over, reiterate BUY and an SOP-derived Target Price of SGD1.10 (implying a 26x FY17F P/E) as we anticipate a recovery in alcohol consumption in Thailand from here on. 
  • Furthermore, with the new excise tax coming into place in September, we expect ThaiBev to use this opportunity to raise prices for its spirit products and experience gross margin expansion. 
  • Key risks include intensified competition in the beer segment.




Juliana Cai CFA RHB Invest | http://www.rhbinvest.com.sg/ 2017-07-03
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.100 Same 1.100



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