THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - Let’s Go For A Brew; Keep BUY
- KEEP BUY, unchanged SGD0.92 Target Price implies 11% upside with 2% FY19F yield.
- THAI BEVERAGE (SGX:Y92)’s 2QFY19 PATMI dropped 12% y-o-y to THB5.8bn due to the high base effect stemming from the spirits segment in 2QFY18.
- Nonetheless, 1HFY19 earnings still made up 57% of our full-year estimate, which is in line with our expectation.
An expected decline.
- The drop in PATMI was anticipated, as trade agents loading up on inventory from its spirits business. This, in turn, was due to prices increases in Apr 2018 following the implementation of an Elderly Fund tax.
- On a 6-month basis, Thai Beverage’s domestic spirits sales volume was still up 7.8% y-o-y, in line with our full-year expectation for spirit volume to grow at high single digits.
Beer segment is bubbling up.
- Beer sales volume excluding Sabeco grew 3.6% y-o-y in 2QFY19. According to management, Thailand’s beer market grew 9% y-o-y in 2QFY19, and the group’s domestic sales volume grew in tandem with this. Total sales volume growth decreased to 3.6% y-o-y after including export volumes for 2Q19.
- For 1H19, its sales volume excluding Sabeco was up 5.7% y-o-y.
- We maintain our expectation for sales volume to grow at a mid-single digit rate for the full year.
Potential upside could come from Sabeco and the non-alcohol beverage (NAB) segment.
- Sabeco sales volume grew 15% y-o-y. It has been gaining market share in Vietnam, and Thai Beverage raised its product prices in Oct 2018 and Mar 2019. It is also working on initiatives to improve cost efficiencies. Although management highlighted that the group is likely to divert these extra margins back into its brands and distribution network, we believe these investments will bear fruit in the medium term.
- Meanwhile, the non-alcohol beverage (NAB) segment is starting to look more interesting as it booked lower SG&A expenses and narrowed losses. Thai Beverage will also be focusing on developing product segments that offer higher profitability this year to improve the performance of this division.
More reasons to celebrate.
- Mid-year economic stimulus measures approved by the Thai Government should help to boost domestic consumption over 3QFY19. As we remain upbeat on the company’s near-term outlook, our forecast and Target Price remain unchanged.
- Maintain BUY.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2019-05-13
SGX Stock
Analyst Report
0.920
SAME
0.920
