Thai Beverage - CGS-CIMB Research 2019-02-12: Bring On The Pints, Please


Thai Beverage - Bring On The Pints, Please

  • Thailand’s beer sales reportedly grew 7.9% y-o-y in 4QCY18; four consecutive months of growth since Sep 18.
  • We are positive on the SABECO integration given it reported a CY18 net profit of VND4.2tr, above its target of VND4.0tr.
  • Thai Beverage share price has rallied 18% YTD but the happy hour is not over yet.
  • Maintain ADD with a higher SOP-based Target Price of S$0.83 (vs. S$0.73 previously).

Positive #1: Domestic beer sales growth sustained

  • According to official statistics, Thailand’s 4QCY18 domestic beer sales rose 7.9% y-o-y to c.591m litres (4QCY17: 547.7m litres), i.e. four consecutive months of growth since Sep 18.
  • We suspect the growth increased on the back of government stimulus packages with the upcoming Thai elections in Mar 19. Given this, and as THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) accounts for c.40% of the beer market (according to the company in Nov 18), this positive trend could be reflected in the upcoming quarter.

Positive #2: SABECO turnaround underway

  • We recently attended SABECO’s 4Q18 analyst briefing. SABECO reported a CY18 net profit of VND4.2tr, above its target of VND4.0tr. Management revealed market share rose 1.8% pts in the six months during which the new management took over. It also shared its recent advertising and marketing efforts to strengthen brand awareness and cost streamlining processes, which emulated Thai Beverage’s efforts when rebranding Chang beer in CY15. Refer to the PDF report attached for more details. 
  • SABECO aims for sales volume growth to outpace the industry’s; Euromonitor estimates total Vietnam beer volume CAGR of 5% over 2018 to 2022 (5.1bn litres in 2022). Thai Beverage recently restructured its shareholding in Vietnam Beverage (Thai Beverage’s local Vietnamese owner of stake in SABECO) and now has an effective c.53% control of SABECO (vs. 26% previously).

1QFY9/19F earnings preview

  • Thai Beverage is expected to report its 1QFY9/19F on 14 Feb after market close.
  • 1Q is typically a seasonally strong quarter for Thai Beverage on account of higher alcohol consumption during the year-end celebrations. We estimate 1QFY9/19F revenue grew y-o-y 50% to THB68.3bn; but finance costs likely rose due to borrowings for previous acquisitions.
  • We expect core net profit settled at ~THB5.9bn, up 11% versus 1QFY9/18 core net profit of THB5.3bn. An analyst briefing is scheduled for 15 Feb.

Maintain Add with a higher Target Price of S$0.83

  • We believe the resumption of Thai beer sales and efforts to optimise SABECO’s earnings will reinstate confidence in Thai Beverage. Our SOP-based Target Price is raised to S$0.83 (vs. S$0.73 previously) as we impute greater control of SABECO.
  • Despite rallying YTD, the stock is still trading at CY20F PER of 17.8x, below its 5-year average of 20x.
  • Catalysts are higher-than-expected margins across all segments and better results from SABECO. Risks are vice versa.

Cezzane SEE CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | 2019-02-12
SGX Stock Analyst Report ADD MAINTAIN ADD 0.83 UP 0.730