Thai Beverage - OCBC Investment 2017-11-27: Consumption Likely To Pick Up Post-mourning Period

Thai Beverage - OCBC Investment 2017-11-27: Consumption Likely To Pick Up Post-mourning Period THAI BEVERAGE PUBLIC CO LTD Y92.SI

Thai Beverage - Consumption Likely To Pick Up Post-mourning Period

  • FY17 results within expectations.
  • Expanding footprint in Myanmar.
  • Reiterate BUY on higher FV.

FY17 dividend higher at THB0.67/share 

  • Thai Beverage PLC’s (ThaiBev) FY17 results were broadly within expectations amid a weaker consumer environment as promotional activities were postponed due to the mourning period in Thailand, which ended post-Oct 17. 
  • FY17 revenue was flat at THB190.0b – Beer (-4.7%), Non-alcoholic Beverages (-0.9%), Spirits (+2.6%), and Food (+1.5). 
  • By segment, Spirits’ net profit grew 2.1% YoY to THB20.4b as it continued to maintain its margins while Beer’s net profit fell 4.1% to THB3.1b on lower sales volume. Non-alcoholic Beverages also saw a significant reduction in net loss and notably recorded positive EBITDA for FY17. 
  • Consequently, excluding a THB8.5b fair value gain from F&N, ThaiBev’s FY17 core PATMI grew 4.3% YoY to THB26.0b, forming 96% of our FY17 estimate.
  • ThaiBev also increased its full year dividend payout from THB0.60/share to THB0.67/share.

One step closer towards Vision 2020 

  • ThaiBev recently announced that it has acquired an aggregate 75% stake in the shares of Myanmar Supply Chain and Marketing Services Co., Ltd (MSC) and Myanmar Distillery Co., Ltd (MDC), for a total consideration of US$741.6m.
  • The two Myanmar-incorporated companies operate two production facilities in Yangon and Mandalay, together with related businesses under the spirits brand, Grand Royal, which is also the largest whiskey player in Myanmar.
  • Based on our estimation, we believe this acquisition was done at ~36x P/E, and will be funded with both internally generated cash flow and external bank borrowings. In our view, while the valuation seems high, this acquisition gives ThaiBev a leading position in Myanmar as the biggest whiskey player, and at the same time, could offer potential synergies to be reaped from a stronger distribution network in Myanmar. 
  • We deem this acquisition positive and important for ThaiBev as part of its plans under its Vision 2020 to diversify away from business concentration in Thailand.

Rolling-forward our SOTP valuation 

  • All considered, with a change in analyst, we update our assumptions and roll-forward our valuations. Consequently, our SOTP-FV (WACC: 6.6%) increases from S$1.01 to S$1.07. 
  • We are positive over the long-term growth of ThaiBev, and expect recovery in consumption in Thailand post-mourning period. 
  • Reiterate BUY.

Eugene Chua OCBC Investment | 2017-11-27
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.07 Up 1.010