THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - 3QFY9/19: In Good Company
- Higher associates brought Thai Beverage's 3Q19 net profit (THB6.7bn) ahead of our forecast of THB5.8bn. 9M19 net profit was 83.1%/81.5% of our/consensus FY19F.
- YTD, domestic alcohol volumes are on an uptrend. Myanmar spirits disappointed. SABECO could surpass its CY19 projections, in our view.
- Domestic business has stabilised. SABECO gains are medium-term growth drivers.
- Maintain ADD with a higher SOP-based Target Price of S$1.00 (prev S$0.96).
Stronger spirits and associates; 9MFY9/19 net profit up 15% y-o-y
- THAI BEVERAGE (SGX:Y92)'s 3QFY9/19 revenue rose 3% y-o-y to THB62.7bn on better spirit revenues (+7% y-o-y) Spirits’ EBIT margin of 22.5% (on better product mix with higher brown spirits and lower average molasses prices) was the main driver of the group’s 3QFY9/19 EBIT rise (+21% y-o-y).
- Higher associates on gains from Frasers Property Limited (SGX:TQ5) (~THB1bn) (+39% y-o-y) also helped lift 3QFY9/19 net profit up 22% y-o-y.
- 9MFY9/19 revenue grew 18% y-o-y on robust domestic alcohol revenues (spirits: +18% y-o-y/beer: +32% y-o-y). EBIT rose 26% y-o-y on operating leverage and cost controls leading to core net profit growth (+15% y-o-y).
Domestic alcohol continues its march; international weakens
- Domestic 3QFY9/19 spirits and beer volumes grew (+6.8%/+7% y-o-y); sluggish Myanmar spirits growth (-23.4% y-o-y) on supply chain hiccups and SABECO volumes (-3% y-o-y) due to destocking. 9MFY9/19 saw domestic volumes growing 5.7% y-o-y (spirits: +7% y-o-y; beer: +5% y-o-y), with Myanmar spirits +10% y-o-y and SABECO at +64% y-o-y.
- 9M earnings were potentially dulled by weak international volumes, in our view.
Stabilised domestic outlook
- Hopes are that any stimulus plans by the Thai government will provide a boost to the lower-income population. This could keep domestic alcohol volumes in a growth mode from 4QFY9/19F onwards. In the interim, Thai Beverage aims to maintain control over operating costs, and we note that beer A&P has been slightly lower.
SABECO could exceed CY19F targets
- During Thai Beverage's recent 2QCY19 analyst briefing, SABECO unveiled the new packaging for its products (featuring a prominent S-shaped dragon) and revealed that it has yet to deploy more initiatives to improve market share and operating efficiency.
- We are positive on its plans to expand production capacity as this should lead to demand growth. It maintains earnings growth target of 7% in CY19, but we believe it can exceed this given the 15% y-o-y growth in 1HCY19.
Maintain ADD
- We like that Thai Beverage’s domestic business has stabilised and view SABECO improvements as the next medium-term earnings growth driver. We raise FY19-21F EPS by 2.1-2.9% namely on higher associates earnings in FY19F and better margins for SABECO.
- Stay ADD with a higher SOP-based Target Price of S$1.00 as we now raise our implied value for SABECO to be based on Thai Beverage’s acquisition price of VND320k/share.
- Catalysts are higher revenue and margins and M&As involving SABECO.
- Risks are gins for the domestic business and SABECO.
Cezzane SEE
CGS-CIMB Research
|
https://research.itradecimb.com/
2019-08-16
SGX Stock
Analyst Report
1.00
UP
0.960
