Thai Beverage - OCBC Investment 2019-02-18: Solid Set Of Results

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THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - Solid Set Of Results

• Results up on domestic purchasing power.
• Thai Beverage's 1QFY19 results beat!.
• Fair value increases to S$0.91.

Core PATMI up 37% y-o-y!

• THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)’s (ThaiBev) results beat expectations. 1QFY19 revenue increased 60% y-o-y to THB 72.6b while gross profit improved 48% y-o-y to THB 20.3b. Net operating profit improved 26% y-o-y to THB 7.2b.
• Due to a one-off expense in 1Q19 (cost relating to business acquisition), 1QFY19 PATMI showed a 151% y-o-y improvement to THB 7.4b, which translates to 33.4% of our initial full-year forecast. Stripping out the one-off expense in 1QFY18, 1QFY19 PATMI showed a 37% increase y-o-y.

Spirits volumes up 24% y-o-y on improved domestic consumer purchasing power

• In terms of segment contribution, while the Spirits segment contributed only 43.6% of sales, it contributed 95.1% of net profit (excluding FRASER AND NEAVE, LIMITED (SGX:F99) and FRASERS PROPERTY LIMITED (SGX:TQ5)). Spirits showed a 28.6% y-o-y increase in revenue and posted a 44.8% y-o-y increase in PATMI. Total sales volume of spirits including Grand Royal Group’s sales was up 25.7% to 181.9m litres.
• Excluding Grand Royal Group, sales volume was up 24.3% to 158.1m litres. This robust performance was largely due to increasing consumer purchasing power and the comparison against a low base in 1QFY18, during which sales agents reduced purchase orders on the back of an excise tax hike.

Challenges continue for the beer segment

• On the other hand, the beer segment performed poorly.
• Despite a 117.3% y-o-y increase in beer EBITDA, PATMI from the beer segment was down 48.6% y-o-y due to higher finance costs. Looking at the top line, Beer segment revenue was up 128.6% y-o-y for the quarter, driven by 253.9% increase in sales volumes including that of Sabeco, which was not included in 1QFY18.
• Excluding Sabeco’s sale, the company’s sales volume for beer increased 7.8% y-o-y, on the back of improved consumer purchasing power.
• We continue to expect positive synergies from the Sabeco acquisition, but note that this will require time to bear fruit.

Positive operational outlook

• After adjustments, our fair value increases from S$0.85 to S$0.91.
• Looking ahead, we believe the upcoming Thai election will be a positive for consumer appetite and see signs of purchasing power strengthening. That said, the thick smog currently afflicting Thailand does concern us as it may dampen the festive spirit and we continue to monitor the situation.
• Given the positive operational outlook, we re-iterate BUY on Thai Beverage.

Deborah Ong OCBC Investment Research | https://www.iocbc.com/ 2019-02-18

SGX Stock Analyst Report BUY MAINTAIN BUY 0.91 UP 0.850