Thai Beverage - OCBC Investment 2016-09-29: Vietnam a key growth market

Thai Beverage - OCBC Investment 2016-09-29: Vietnam a key growth market THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Vietnam a key growth market

  • Sabeco slated for divestment.
  • Several possible foreign bidders.
  • Vietnam beer volume to grow at 6% CAGR.

Reportedly bidding for a stake in Vietnam’s largest brewer 

  • With Vietnam’s government proposing to sell off Sabeco (Saigon Beer, Alcohol, Beverage Corporation) and Habeco (Hanoi Alcohol Beer & Beverages Corp) for an estimated total of US$2.2b, various media outlets have revealed that Thai Beverage (Thai Bev) is one of several bidders for a stake in Vietnam’s largest brewers.
  • According to data from Euromonitor International, Sabeco has been the leader for beer in Vietnam with a 46% market share in volume terms in 2015, underpinned by brands that include Saigon Export and 333.

Sabeco to be divested in two tranches 

  • Sabeco had recently filed documents to seek approval from the Ministry of Industry and Trade to join the Vietnam Stock Index (VN-Index) as the government would want the market to determine the price and valuation of Sabeco.
  • Following its listing, the divestment of Sabeco will be done in two tranches, whereby the government will auction 53.59% in the company this year and the remaining 36% in 2017.
  • Articles also suggest the government is looking for the highest bidder.

Foreign brewers already in Vietnam 

  • Vietnam’s beer volume is expected to grow at a CAGR of 6% over 2015-2020F based on Euromonitor forecasts. 
  • Against this backdrop, there are a few notable foreign brewers that have presence in Vietnam. For instance, Anheuser-Busch InBev NV has a brewery in Vietnam, while Carlsberg has a 17% stake in Habeco, which holds a smaller market share of ~18% with its Bia Ha Noi brand. Thai Bev’s peer Boon Rawd Brewery (maker of Singha beer) had also agreed to invest in Masan so as to tap on its distribution network in Vietnam.

Maintaining HOLD 

  • We keep in mind that Thai Bev is not new to Vietnam and reportedly has plans to distribute and market Chang beer in the market. In addition, F&N has an 11% stake in Vinamilk. 
  • All considered, we prefer to wait out on this development and keep our assumptions unchanged. 
  • We maintain our HOLD rating and fair value estimate of S$1.01, while longer term investors may consider accumulating at S$0.96 or below.

Jodie Foo CFA OCBC Investment | 2016-09-29
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.01 Same 1.010