Thai Beverage - CIMB Research 2016-02-29: New Chang beer does well

Thai Beverage - CIMB Research 2016-02-29: New Chang beer does well THAI BEVERAGE PUBLIC CO LTD Y92.SI 

Thai Beverage - New Chang beer does well 

  • Maintain Add and SOP target price of S$0.83. Thai Bev’s 4Q had positive data points for beer, negated by non-alcoholic drinks, higher financing costs and taxes. 
  • We deem 4Q15 results as a mixed performance. While the strong showing by beer after the rebranding is highly encouraging, the other divisions are not doing as well. 

4Q15 core net profit was below our and consensus expectations 

  • FY15 core net profit (excluding MBL sale gains) was below our and Bloomberg consensus expectations, mainly due to non-operating factors (lower associates, higher tax rates and higher financing costs). FY15 core net profit was 92% of our and consensus forecasts. 
  • 4Q15 operating EBIT and EBITDA were ahead of our estimates as 4Q beer volumes (+50% yoy) were stupendous and margins inched higher. Operationally, this key positive was doused by yoy contraction in 4Q spirits volume and greater non-alcoholic EBITDA losses. 

Beer was the big positive, EBITDA margins recovered on volumes 

  • 4Q beer sales (THB15.76bn, +50% yoy) were extremely good, as volumes had a drastic upsurge. We believe that the effect was partly due to pent-up demand, as channels cleared in 3Q prior to the launch of the new Chang beer. 
  • Beer EBITDA margin recovered to 5% in 4Q, up from 2.3% in 3Q. On full-year basis, beer EBITDA margin rose from 3.6% in 2014 to 5.3% in 2015. Beer was the strongest driver of Group profit growth in 2015. 

4Q spirits volume and sales showed slight contraction (-2% yoy) 

  • The operational negatives came from in spirits and non-alcoholic drinks. 4Q spirit sales fell 2% yoy, as spirits volumes fell by a similar 2%. 
  • Management previously guided that white spirit sales were flagging as farmers were hurt by removal of rice subsidies. 
  • We are a tad worried about this as spirits are supposed to be the stable cash cow. 

Negatives were wider EBITDA losses for non-alcoholic drinks… 

  • The other operational negative came from non-alcoholic drinks. 4Q15 non-alcoholic sales were flat (-1% yoy) and did not react to seasonal effects and higher A&P spending. 
  • EBITDA losses were higher qoq as selling expenses rose in 4Q. 

… lower associates contribution and higher taxes 

  • As the factors that dragged a decent core net profit performance down to a miss were not operating factors (lower associates, higher financing costs and higher taxes), we are less inclined to worry on the headline 4Q15 net profit miss. 

Dividends unchanged, proposing to change financial year-end 

  • Total DPS was flat yoy at THB0.61, with final and interim unchanged. This represented dividend payout of 68% (2014: 71%) of 2015 core net profit (excluding gains from F&N’s sale of MBL). Net gearing improved to 0.37x in 2015. (2014: 0.47x) 
  • Separately, the group is proposing to change its financial year-end from Dec to Sep. More details will be available after the results briefing on Monday night.

Kenneth NG CFA CIMB Securities | Jonathan SEOW CIMB Securities | 2016-02-29
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 0.83 Same 0.83