Thai Beverage - OCBC Investment 2018-05-17: Looking Forward To World Cup 2018

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THAI BEVERAGE PUBLIC CO LTD SGX: Y92

Thai Beverage - Looking Forward To World Cup 2018

• Core 2QFY18 largely in-line.
• Soft domestic beer market.
• Interim dividend of THB0.15.

Core 2QFY18 PATMI met 25% of FY18 estimate

• Thai Beverage PLC’s (ThaiBev) core 2QFY18 results met our expectations as earnings was lifted by contributions from the recently acquired companies in Myanmar and Vietnam, despite soft domestic consumption market, especially for beer segment. 2QFY18 revenue jumped 34.3% y-o-y to THB67.6b mainly attributable to Beer (+74%) and Spirits (+14%) businesses.
• However, operating expenses also surged 36.6% y-o-y to THB58.6b on increased costs of packaging and beer cans, coupled with more normalized marketing spending relative to mourning period in 2QFY17. 
• Consequently, excluding non-recurring expenses, ThaiBev’s 2QFY18 core PATMI fell 3.1% y-o-y to THB6.3b, forming 25% of our FY18 estimate.

Gained management control over Sabeco

• Management attributed soft domestic consumption to weak macroeconomic conditions and more cautious spending by its customers, especially in the beer segment. 
• By segment in 2QFY18:
  1. Spirits’ PATMI grew 2.8% y-o-y to THB5.7b with contributions from MSC and MDC (Myanmar acquisitions),
  2. Beer’s PATMI plunged 66.7% to THB307m due to finance costs related to the acquisition of Sabeco in Vietnam, and
  3. Non-alcoholic Beverages recorded a 22.7% increase in net loss on lower revenue due to product mix despite higher sales volume.
• Over the near-term, management noted there are many activities planned to leverage on World Cup in Jun 18 and expect recovery in alcohol consumption during the period given compatible match timings for the viewers in Asia.
• Over the longer-term, we believe ThaiBev’s recently expanded exposure outside Thailand will help drive growth, and especially deem ThaiBev’s acquisition of the largest beer player in fast- growing Vietnam market, Sabeco, to be positive and strategically important.
• Management also noted during analyst call that ThaiBev now has management control over Sabeco, which in our view, helps ease its ability to unlock potential synergies between the two companies in a large ASEAN market.

Largely unchanged forecasts

• As 2QFY18 came in within expectations, we keep our forecasts and S$0.95 Fair Value unchanged.
• Despite the higher gearing, management continues to be committed to its dividend policy of at least 50% payout ratio.
• (Maintain BUY)

Eugene Chua OCBC Investment | https://www.iocbc.com/ 2018-05-17

SGX Stock Analyst Report BUY Maintain BUY 0.950 Same 0.950