Thai Beverage - CIMB Research 2017-11-24: 4QFY17 In-line; Looking To Happier Hours In CY18

Thai Beverage - CIMB Research 2017-11-25: 4QFY17 In-line; Looking To Happier Hours In CY18 THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - 4QFY17 In-line; Looking To Happier Hours In CY18

  • Thai Beverage's 4QFY9/17 core net profit of S$5.0m (-27% qoq/ +9% yoy) was within our/consensus expectations at 18.9%/18.2% of FY17 core net profit estimates (S$26.3m/ S$27.3m).
  • A final DPS of THB0.47 was announced, taking FY17 DPS payout to 65% (vs. FY16 DPS of THB0.60/60% payout).
  • We think CY18 will be a better year, with Thailand in “celebration” mode on the back of the new King’s coronation. We raise our FY18-19F EPS by 3%/5% and introduce our FY20F forecasts. This marks a change in analyst coverage. 
  • We maintain our Add call and roll forward to a higher SOP-based TP of S$1.15.



FY17F within expectations, with 4% yoy core net profit growth 

  • 4QFY9/17 revenue increased by 5% qoq even though 4Q is seasonally weak, as clients stocked up ahead of the implementation of the excise tax duty in 4QCY17. 
  • FY17 core net profit of THB26.0bn grew by 4.0% yoy despite a slight decrease in revenue, forming 99% of our forecast. This was largely due to a solid performance from spirits, slightly better margins from the beer segment and lower losses in the non-alcoholic beverage (NAB) division.


Volumes dip on lower beer, but spirits save the day 

  • FY17 volumes (3.08bn litres vs. 3.1bn litres in FY16) dipped marginally (-0.8%) on lower beer volumes (-6.8% yoy); but both spirits and NAB charted 2.8%/1.2% yoy growth.
  • Despite the dip, it was the spirits division that led the 4% growth in net profit, although net profit margin (NPM) was lower at 18.7% (vs. 19.0% in FY16) due to a weaker product mix. Lower losses in the NAB division of THB0.9m (vs. THB1.7bn loss in FY16F) provided much needed support.


FY18F should be buoyed by better Thai consumer sentiment 

  • Our Thai research team believes that 2018 will be a year of celebration. The new King’s coronation ceremony is expected to be in 1H18, which should benefit the tourism, retail and consumer discretionary sectors. A recovery in consumer sentiment and spending should have a knock-on effect on ThaiBev’s business, in our view. 
  • The Thai consumer confidence index (CCI) rose to 76.7 in Oct 17 (vs. 75 in Sep 17).


Update on corporate exercises and mergers and acquisitions (M&A) 

  • Management provided scant updates on the F&N and FCL corporate exercise (which was expected to be completed in Sep 17, but has not occurred yet); and the KFC M&A (expected to be completed in Dec 17). However, it reiterated that the acquisitions are part of the longer-term goals set out in its Vision 2020 strategic roadmap. 
  • We think that Thaibev may embark on more international alcoholic beverage and non-beverage M&As through various means.


Maintain Add, with a higher TP 

  • We tweak up our FY18-19F EPS as we expect higher sales due to better Thai consumer sentiment from CY18 onwards. We also introduce FY20F estimates and roll forward our target price to CY19. Accordingly, our SOP-based TP target price is now S$1.15 (vs. S$1.07 previously). 
  • We believe there could be more interest in ThaiBev given the overall better sentiment for the consumer segment. In the longer term, its Vision 2020 strategic plan should help to re-rate the stock further.


Risks 

  • Upside risks include higher-than-expected margins and more aggressive acquisitions that could translate into higher EPS growth. 
  • Downside risks include a slower-than-expected pick-up in consumer sentiment which could translate into weaker sales and net profit growth, as well as any delays in M&As.




Cezzane SEE CIMB Research | LIM Siew Khee CIMB Research | http://research.itradecimb.com/ 2017-11-25
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 1.15 Up 1.070



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