Thai Beverage - DBS Research 2016-05-16: Runaway performance on Beer's showing

Thai Beverage - DBS Research 2016-05-16: Runaway performance on Beer's showing THAI BEVERAGE PUBLIC CO LTD Y92.SI 

Thai Beverage - Runaway performance on Beer’s showing

  • Reiterate BUY with raised TP of S$0.92
  • 1Q16 results exceeded expectations on strong beer performance, following 4Q15’s momentum
  • Raise FY16F/17F earnings by 10% each
  • Re-rating to continue as it transforms into a regional player with strong fundamentals.



Reiterate BUY, TP raised to S$0.92. 

  • We reiterate our BUY recommendation for Thai Beverage Public Company (ThaiBev) with a higher TP of S$0.92 and as a key pick given its strong earnings momentum and its transformation into a regional beverage player. 
  • ThaiBev’s 1Q16 results blew us away with a solid momentum, particularly from its Beer segment.

1Q16 – runaway performance on Beer’s showing. 

  • ThaiBev’s 1Q16 results exceeded our expectations with net profit up 30% y-o-y to THB8.56bn on the back of 21% growth in revenue to THB55.2bn - the highest core net profit recorded since 2006. 
  • The positive surprise arose largely from the surge in its Beer segment’s profits as it continued to post strong volume growth (+61% y-o-y) and higher margins, following on its momentum in 4Q15. 
  • EBIT margins improved to 17%, up from 16.2% a year ago, due to higher sales volume and operating efficiencies.

Revised FY16/17F earnings by 10% each; valuation attractive on robust growth. 

  • We revised our forecasts up by 10% each for FY16F/17F on the back of the strong performance of its Beer segment. Excluding the disposal gain in FY15 from its associate FNN, we project core profit growth of c.28%, driven by Beer, Spirits and smaller losses from its Non-Alcoholic Beverage segment. 
  • With a solid performance in 1Q16 and the strong momentum in Beer, we believe the market will continue to gain confidence in the group’s potential to deliver which will drive re-rating for the counter. 
  • It is currently trading at 17.8x/16.4x FY16F/17F PE. 
  • Further catalysts are the potential corporate restructuring with the eventual consolidation of FNN as a subsidiary, and monetisation of its stake in Frasers Centrepoint Limited.


Valuation:

  • Our target price is raised to S$0.92 on higher profit forecasts. 
  • Our TP is based on sum-of-parts valuation, derived via discounted cashflows of its core operations, and imputing fair values for its stakes in F&N and Frasers Centrepoint Limited (FCL).

Key Risks to Our View:

  • Further excise tax hikes. Further increase in excise duties without a commensurate will lead to an increase in ASP.




Andy Sim CFA DBS Vickers | http://www.dbsvickers.com/ 2016-05-16
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.92 Up 0.82


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