Thai Beverage - RHB Invest 2019-02-18: Spirits Rising, Beer Too ~ BUY

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) | SGinvestors.io THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - Spirits Rising, Beer Too: BUY

  • Maintain BUY with a higher SGD0.92 Target Price, from SGD0.85, 13% upside and 2.4% FY19F yield.
  • Thai Beverage's 1QFY19 (Sept) results beat our expectation; core PATMI grew 37% y-o-y on the back of rising spirits and beer consumption in Thailand.
  • We raised our forecasts 5%/4%/2% for FY19F-21F as a result of higher expected alcohol consumption, partially offset by higher finance costs.
  • With an improvement in alcohol demand from a low base in 2018, we also expect Thai Beverage's share price to increase over the next three quarters.



1QFY19 result was above expectations.

  • THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) reported THB7.4bn core net profit, up 37% y-o-y.
  • We expected the first quarter to be a seasonally stronger one yet, Thai Beverage still outperformed in 1QFY19 and made up 32% of ours as well as consensus estimate.


Earnings drivers.

  • The spirits segment, in particular, showed a 24% y-o-y surge in volumes, driven by a higher consumption in rural areas and low base effect as trade agents were destocking in 1QFY18.
  • Beer volume in Thailand also grew 7.8% in line with our expectation. Sabeco however, incurred losses, as a result of kitchen sinking during the quarter.


Positive trend to continue in near-term.

  • We believe Thai Beverage's share price would continue to trend up as alcohol consumption continues to grow on the back of higher farm income, general elections campaigns and a low base effect in 2018.
  • Over the next three quarters, we expect spirits volume growth to normalise to high-single digit, while beer volume to grow at mid-single digit.
  • Management also highlighted that the bulk of Sabeco’s kitchen sinking has been completed, which should suggest a better q-o-q result for Sabeco.


We raised our forecasts

  • We raised our forecasts 5%/4%/2% for FY19F-21F as a result of higher alcohol consumption, partially offset by higher finance costs, which increased our SOP valuation to SGD0.92/share, from SGD0.85. See attached PDF report for SOP details.
  • Over the medium term, we expect potential catalysts to come from an improved cost structure of Sabeco, realised synergies between the two groups as well as improved non-alcohol beverage segment.





Juliana Cai CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-02-18
SGX Stock Analyst Report BUY MAINTAIN BUY 0.92 UP 0.850



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