Thai Beverage - RHB Invest 2017-05-15: Recovering From A Hangover

Thai Beverage - RHB Invest 2017-05-15: Recovering From A Hangover THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Recovering From A Hangover

  • Share price corrected by c. 3% last Friday on a weak YoY performance in 2QFY17 (Sep) which was, however, largely in line with our expectations. 
  • We note that while consumption remains soft since the passing of the King, there were sequential improvements on a QoQ basis. 
  • We also note, based on statistics provided by the Bank of Thailand, that beer consumption has begun to normalise in Mar 2017. 
  • Furthermore, we think there may be a volume boost in 4QFY17F as traders stock up prior to the new excise tax hike that is expected to be implemented in Sep 2017. 
  • Maintain BUY on ThaiBev and a SGD1.10 TP.

Consumer spending still soft, but improvements QoQ. 

  • 2QFY17 PATMI continued to be weak at THB6.6b (-24% YoY) due to sluggish sales across all three main segments. However, we think that consumer spending is recovering from the mourning period as revenue registered 8% QoQ growth. 
  • Based on statistics provided by the Bank of Thailand, consumption of beer has begun to normalise in Mar 2017, showing only a -2% YoY change in volume (Oct 2016: -17% YoY). 
  • Given that the new excise tax would be implemented in mid-Sep 2017, there may be a volume booster in 4QFY17F as retailers could potentially stock up on inventories before a price hike.

Market share in Chang beer maintained. 

  • According to management, Chang’s market share remained relatively stable at about 40% as at Apr 2017. While Singha Corporation has reacted with the introduction of its U Beer, this brand was seen to be cannibalising market share from Singha and Leo brands. 
  • We note that U Beer continues to target the younger demographics and it was marketed more aggressively on social media than other traditional platforms. Currently, U Beer has a market share of 1% and we do not see it as a significant threat to Chang as yet.
  • Thai Beverage (Thaibev) also reintroduced Federbrau – a German-inspired premium beer into the market in Feb 2017. Management cited that the product has gain good traction. Year-to-date sales volume for Federbrau has already exceeded the whole of last year’s volume, albeit from a low base.

Non-alcohol beverages on track to turn EBIT positive in FY18F. 

  • 1HFY17 EBITDA remained in the black despite lower sales revenue. 
  • Oishi maintained its No 1 position in the green tea segment with a 45% market share. Crystal is now the market leader in the bottled water segment with a 20% share. Est also preserved its market share of 10% in the carbonates space. 
  • With a new plant for Crystal bottle water coming up this year, we expect to see stronger revenue growth and improved profitability for the segment next year.

Maintain BUY and TP SGD1.10. 

  • Although consumer spending continues to be affected by the passing of the King, we believe ThaiBev is on the right track to capture the market once consumption resumes. 
  • We kept our forecast unchanged and maintain our BUY call with a SOP-derived TP of SGD1.10

Juliana Cai CFA RHB Invest | 2017-05-15
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.100 Same 1.100