Thai Beverage - DBS Research 2015-11-13: Positioning to be a regional player

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THAI BEVERAGE PUBLIC CO LTD Y92.SI 

Thai Beverage Public Company - Positioning to be a regional player 

Maintain BUY, TP at S$0.82. 

• We maintain our BUY recommendation with a TP of S$0.82. 
• We believe ThaiBev is taking steps to transform into a regional beverage player. 
• In our view, we believe ThaiBev should have an advantage over its peers given its dominant position as the leading spirits player in Thailand, providing it with ample firepower and serve as a bastion for the company while it invests in new avenues of growth. 

3Q15 results resilient despite weak sentiment. 

• ThaiBev’s 3Q15 results were within expectations. 
• While headline net profit surged by 115%, this was on the back of a disposal gain by its associate FNN. Excluding this, net profit would have grown c.12% largely on stronger associate’s contribution. 
• Revenue grew by 3% while EBIT slipped 7% y-o-y. This was largely a result of higher costs relating to the relaunch of Chang Beer, as well as higher losses at its Non-Alcoholic Beverages given its investment phase. 

Growth is projected to continue. 

• We raised FY15F forecasts by 9%, taking into account the one-off gain by F&N’s disposal of its 55% stake in MBL, offset partially by a lower operating profit. 
• While consumer sentiment remains weak, we note that the Group’s operations remained relatively resilient. 
• With the conclusion of F&N’s disposal of the latter’s stake in Myanmar Brewery Limited, this could possibly pave the way for the eventual consolidation of FNN as a subsidiary, coupled with the eventual monetisation of its stake in Frasers Centrepoint Limited. 
• In our view, this tie in with the Group’s announced “Vision 2020” Strategic Roadmap, in which one of the targets is to increase NAB's revenue contribution to over 50%. 

Valuation: 

• Our target price is revised marginally to S$0.81 as we roll our valuations over to FY16F. 
• Our TP is based on sum-of-parts valuation, derived via discounted cashflows of its core operations, coupled with fair values of its stakes in F&N and Frasers Centrepoint Limited. 

Key Risks to Our View: 

• Further excise tax hikes. Further increases in excise duties without a commensurate increase in ASP.

Andy Sim DBS Vickers | http://www.dbsvickers.com/ 2015-11-13

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.82 Up 0.81