Thai Beverage - RHB Invest 2017-10-16: Myanmar Acquisition To Fulfil “Vision 2020”

Thai Beverage - RHB Invest 2017-10-16: Myanmar Acquisition To Fulfil “Vision 2020” THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Myanmar Acquisition To Fulfil “Vision 2020”

  • Last week, ThaiBev announced that it has acquired a 75% stake in Myanmar Supply Chain and Myanmar Distillery for USD742m. This happened shortly after the recent acquisitions of the KFC franchise and the Spice of Asia in Thailand. 
  • We view these acquisitions as in line with the group’s “Vision 2020” to raise revenue contribution from outside of Thailand and diversification from alcohol in excess of 50%. 
  • Maintain BUY on ThaiBev with a higher SOP-derived Target Price of SGD1.12 (from SGD1.10, 20% upside) as we roll over our valuation to FY18F.

Back into the Golden Land. 

  • The Myanmar Supply Chain (MSC) and Myanmar Distillery (MDC) operate two spirit production facilities in Yangon and Mandalay under the Grand Royal brand. Grand Royal is the number one whisky player with over 70% market share in the Myanmar’s whisky market. 
  • This acquisition marked the return for Thai Beverage (ThaiBev) back to the alcohol market in Myanmar, after Fraser & Neave (F&N) sold its stake in the Myanmar Brewery in 2015.

Acquisition multiple. 

  • Based on our estimation, ThaiBev paid the equivalent of 36x P/E for the deal. While this may seem high relative to ThaiBev’s current P/E of 22x, we think the valuation is in line with that of other alcohol players in the emerging markets. 

Future potential in the Myanmar. 

  • Myanmar’s per capita consumption of spirit is still very low compared to the consumption for other non-Muslim countries in Asia. According to BMI Research data, the volume of spirit consumption is forecasted to experience a 9% CAGR over the next 5 years. 
  • We believe the acquisition would also give ThaiBev a strong distribution network to export its portfolio of alcohol products to the emerging markets.

Maintain BUY on ThaiBev 

  • With the cremation of King Rama IX to be held at the end of October, we expect to see a recovery in alcohol consumption in FY18F after one year of mourning. Coupled with a potential margin expansion in the spirits segment and the foray into Myanmar, we remain positive on the near-term outlook of ThaiBev. 
  • We roll over our SOP valuation to FY18F and raise our TP to SGD1.12 (from SGD1.10)

Juliana Cai CFA RHB Invest | 2017-10-16
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.12 Up 1.100