Thai Beverage - RHB Invest 2017-07-03: Everything Seems Better After A Little More Beer

THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Everything Seems Better After A Little More Beer

Based on the latest statistics released by the Bank of Thailand, beer sales volume in the Kingdom has registered an increase of 5% and 10% YoY in April and May 2017 respectively.
We think this is a signal that beer consumption pattern in Thailand has normalised post-Songkran festival and the mourning effects on beer sales are behind us. We expect the recovery to continue from here on.

Reiterate BUY on ThaiBev with an SOP-derived Target Price of SGD1.10 (22% upside).

Thailand’s volume of beer sales has registered positive YoY growth of 5% and 10% in April and May 2017 respectively. This is a stark turnaround from the 17% decline YoY in October 2016, immediately after the passing of the late King. Currently with two consecutive months of positive growth, we believe beer consumption has normalised post-Songkran and that the worst is behind us.
We expect 2H17 to continue to see positive growth in beer volumes. According to management, Thai Beverage (ThaiBev) has maintained its 40% market share in the beer segment as at April 2017. As such, we expect ThaiBev’s beer segment to perform in line with the market.

While there is no market data released on spirits, we believe the recovery in beer consumption can be seen as a proxy for the consumption of spirits also. We anticipate the decline in spirit volumes to dissipate in 2H17.
In addition, we note that agents stock up on spirits inventories in anticipation of a tax hike during January-March 2016, which resulted in strong sales number for ThaiBev in 2Q16. We expect a similar restocking phase by agents given that the new excise tax is scheduled to be implemented in September 2017.

The worst is over, reiterate BUY and an SOP-derived Target Price of SGD1.10 (implying a 26x FY17F P/E) as we anticipate a recovery in alcohol consumption in Thailand from here on.
Furthermore, with the new excise tax coming into place in September, we expect ThaiBev to use this opportunity to raise prices for its spirit products and experience gross margin expansion.
Key risks include intensified competition in the beer segment.

Juliana Cai CFA RHB Invest | http://www.rhbinvest.com.sg/ 2017-07-03

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