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.

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.

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.

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.

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 | http://www.rhbinvest.com.sg/ 2017-05-15

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.100 Same 1.100