Thai Beverage - OCBC Investment 2017-06-30: Pending Details For Change In Excise Taxes

Thai Beverage - OCBC Investment 2017-06-30: Pending Details For Change In Excise Taxes THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Pending Details For Change In Excise Taxes

  • Amended excise tax act from 16 Sep.
  • New progressive tax for sugar drinks.
  • Pending more details.

New excise tax structure for beverages 

  • One of the key factors we have been keeping an eye on for Thai Beverage is the pending change in excise taxes for alcoholic beverages. 
  • In addition, as part of the broader amended excise tax act, the government is going ahead with its plan to introduce a new excise tax structure on non-alcoholic beverages as well, which would include carbonated soft drinks and RTD Green Tea under Est and Oishi
  • Beverages with sugar levels higher than the government’s threshold would incur a higher tax burden, such that the rates will differ across three bands of sugar content level: 10-14%, 14-18% and 18% or higher. While details on exact rates for both alcoholic and non-alcoholic beverage are to be disclosed, the date of implementation for the excise tax act is expected to be from 16 Sep.

Pending details before determining potential impact 

  • At this juncture, more details would have to be released before we can expect potential reactions by the company as well as trade agents.
  • This act may entail possible price increases to pass on the costs and stocking up of inventory by trade agents before the excise tax implementation. There could also be a lag in impact should manufacturers be given an adjustment period.

Management to focus on cost control and profitability 

  • The Songkran festival in April was said to be lowkey and consumer sentiment is anticipated to remain soft over the year-long mourning period.
  • Nonetheless, we note that market share for Thai Bev’s beer and non-alcoholic beverages have been largely steady. As such, management will be focusing on cost control and profitability for the remaining of FY17 (Year-end Sep), and we believe the group is prepared for changes in the excise tax act. 
  • With that said, some A&P expenditure would still have to be made, particularly for segments in a highly competitive market so as to maintain its presence and market share. We also wait for progress on the upcoming corporate restructuring that we believe has been lending support to the group’s share price. 
  • We maintain our BUY rating and fair value estimate of S$1.01 given the positive growth story beyond FY17.

Jodie Foo OCBC Investment | http://www.ocbcresearch.com/ 2017-06-30
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.010 Same 1.010