Thai Beverage Public Company (THBEV SP) - DBS Research 2017-09-19: Excise Tax Increase Within Expectations

SGinvestors.io

THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage Public Company (THBEV SP) - Excise Tax Increase Within Expectations

• Alcohol excise tax change implies 1%-5% increase in spirits and beer selling prices, all else being constant.
• The increase was within expectations and smaller than past two excise increases in 2012 and 2013.
• ThaiBev should be able to pass on the hikes fully, in our view.
• Maintain forecasts and BUY, TP: S$1.07.

What’s New 

Thailand announces new excise taxes, approximately translate to 1%-5% of ASP, effective 16 Sep. 

• As widely anticipated, the Thai Authorities announced changes in excise taxes for alcohol among others, effective from 16 Sep 2017. 
• Based on our understanding, we estimate that the increase in excise taxes for spirits and beer ranges from c.1% to under 5%. Along with the authorities’ rhetoric earlier, the latest change sees the tax rate referencing retail prices, from net wholesale.
• Based on our understanding, the increase in excise taxes is approximately about 1% on current ASP for brown spirits, c.2% for white spirits and c.4% to under 5% for beer. All in, we estimate that the change in excise duties alone could see ASP increase by THB2/bottle for white spirits and beer, and THB3-4/bottle for brown spirits.
• For sugar tax, green tea will cost THB1.13 to THB2.05 more, according to a Bangkok Post article. We estimate that this will translate into a 10-15% rise on selling prices. 
• On the other hand, carbonated soft drinks will see a smaller increase, for those with regular sugar.

Our views 

No significant surprises. 

• Overall, the increase in excise taxes are well within our estimates and the effects should not have a large dampener on overall consumption. We have noted in our earlier reports (see report: Thai Beverage Public Company (THBEV SP) - On Track For Stronger Y-o-y Growth) that new excise duties should increase beer prices by 4-5%, based on media reports. In fact, this resultant excise increase is relatively muted compared to previous increases back in 2012 and 2013, where the excise change involved an increase of 5%-28%.
• We are retaining our forecasts and believe that ThaiBev should be able to pass on the increase to consumers without seeing significant impact on consumption volumes.

4Q17 should see better y-o-y performance. 

• We maintain our stance that 4Q17F should show stronger y-o-y growth vs last year on the back of:
  1. trade loading in anticipation of an excise tax increase, and
  2. stronger associates contribution.

Maintain BUY and TP of S$1.07. 

• We maintain our BUY recommendation on ThaiBev and believe that uncertainties surrounding the slower consumption in Thailand from the mourning period are only temporary.

Andy SIM CFA DBS Vickers | Alfie YEO DBS Vickers | http://www.dbsvickers.com/ 2017-09-19

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.070 Same 1.070