Thai Beverage - CGS-CIMB Research 2019-05-11: 2Q19/FY19F Still Swigging


Thai Beverage - 2Q19/FY19F: Still Swigging

  • THAI BEVERAGE (SGX:Y92)'s 1HFY9/19 net profit of THB13.2bn was marginally ahead at 57.5% of our FY19 forecast (THB22.9bn) but in line with consensus (THB24.4bn).
  • Earnings were a slight beat due to higher interest income. We also believe that beer margins may improve ahead due to better SABECO operations.
  • We raise our FY19-21F EPS on heightened confidence in Thai Beverage’s recovery. Our SOP-based Target Price is raised to S$0.94 and we maintain our Add call.

2QFY9/19 lower on softer spirits and associates; 1H rose 11%

  • THAI BEVERAGE (SGX:Y92)'s 1HFY9/19 revenue rose 26% y-o-y to THB142.6bn, with the beer segment (+53.4% y-o-y) leading most of the revenue gains post consolidating SABECO. 1HFY9/19 spirits revenue was still in growth mode (+8.9% y-o-y), despite 2QFY9/19 shrinking 6% y-o-y on account of a high base effect in 2QFY9/18 when agents and retailers stocked up in Mar 18 ahead of price hikes effected in Apr 18.
  • 1HFY9/19 EBIT gained 50% y-o-y, again on account of SABECO’s inclusion in the beer segment. 1HFY9/19 interest income grew 139% y-o-y.
  • Overall, 1HFY9/19 core net profit improved 11% y-o-y.

Domestic alcohol recovers; beer volumes benefit from SABECO

  • In 1HFY9/19, domestic spirits and beer volumes grew by 7.8%/5.7% y-o-y. Including Myanmar spirits volumes for spirits grew 9.6%. If including SABECO, 1HFY9/19 beer volumes grew by 54%.
  • According to management, third-party data show that brown spirit volumes were still in growth mode in Apr 19, whilst white spirits typically see stronger growth trends in comparison.

Positive on a recovery; SABECO to continuously improve

  • Management reiterates that FY19F will be a positive year for Thai domestic alcohol consumption, with near-term prospects likely boosted by a festival held for the Coronation of the King in May.
  • For SABECO, 1QCY19 (the company’s FYE is Dec) revenue/net profit grew by 19%/9.6% y-o-y on product volume and price increases (one price hike in Oct 18 and one in Mar 19), which was ahead of its 7% y-o-y budgeted revenue growth estimate for CY19F. Margins are expected to continually improve as costs are rationalised and procurement processes are optimised.

Maintain ADD

  • We continue to be comforted by the y-o-y improvement in the domestic consumption environment, as well as improvement in SABECO’s operational matrixes.
  • We upgrade FY19-21F EPS slightly on higher margins, especially for SABECO, and higher interest costs. We also reduce our discount to peers for its core business. This raises our SOP-based Target Price to S$0.94 (from S$0.90).
  • Maintain ADD.
  • Catalysts are higher-than expected margins across all segments, better results from SABECO and M&A activities.
  • Risks are slower alcohol volumes, lower SABECO margins and higher costs.

Cezzane SEE CGS-CIMB Research | https://research.itradecimb.com/ 2019-05-11
SGX Stock Analyst Report ADD MAINTAIN ADD 0.94 UP 0.900