Thai Beverage - UOB Kay Hian 2019-11-25: FY19 Missed Expectations; Finance Costs Still A Drag


Thai Beverage - FY19 Missed Expectations; Finance Costs Still A Drag

  • Thai Beverage reported 4QFY19 net profit of Bt3.4b, up 11% y-o-y. Full-year core PATMI made up 93%/94% of our and consensus estimates, missing expectations.
  • The key negative came from the beer segment’s PATMI, which dropped to a net loss for the quarter as it continued to be weighed down by finance expenses.
  • Dividend payout ratio remained similar to the FY18 level.
  • Thai Beverage is trading close to its historical mean at 19.4x FY20F PE. Maintain HOLD with a target price of S$0.90.
  • Entry price: S$0.78.


FY19 core profit missed expectations.

  • THAI BEVERAGE (SGX:Y92) reported 4QFY19 core PATMI of Bt3.4b, up (+10.6% y-o-y), while FY19 core PATMI came in at Bt23.3b (+13.8% y-o-y), see Thai Beverage Announcements. This represents 93%/94% of our/consensus full-year forecasts. The results were below expectations.

Revenue aided by volume growth, but margins remained challenged by higher finance costs.

  • Overall, revenue was up by 11.3% y-o-y in 4QFY19. Management noted that the domestic beverage business showed an improvement on the back of the government’s stimulus measures which have boosted consumer purchasing power.
  • Net margin was flat y-o-y in 4QFY19, but declined slightly on a full-year basis. This was largely due to higher financing costs which rose to Bt7.2b (+44.0% y-o-y), attributed to new debentures issued to fund acquisitions.

Relatively unchanged payout ratio.


Spirits: Seeing an improvement in volumes.

  • The domestic spirits segment recorded an increase in volume to 132m litres (+11.5% y-o-y), pointing to a higher growth rate compared to 3QFY19’s; management noted that there was organic flow of market demand, likely from improved purchasing power. However, we are slightly more cautious of volume growth given that full-year FY19 domestic sales volumes of 578m litres is close to the five-year average of approximately 570m litres.
  • Management noted that domestic spirits’ ASP for FY19 was relatively similar to FY18’s. As for the Myanmar spirits business, volume growth is back on track after a supply chain issue in the previous quarter. Along with a higher inflation and excise tax rate, ASP can be expected to rise at between 3-4% y-o-y in the near term.

Beer: Segment was a drag with finance costs.

  • Attributable profit to shareholders dropped to a net loss of Bt302m in 4QFY19 with continued higher finance costs; this came as a negative surprise even though volume growth was substantially strong. Domestic sales volume was at 804m litres, up 7.4% y-o-y, while management also noted that Sabeco sales volume grew stronger than the industry’s.
  • Overall, net margin for the segment was still considerably small at 2.6% for FY19.

Food: Affected by start-up costs from new stores; NAB improving but still in the red.

  • The food segment saw a substantial increase in costs as the group incurred expenses from new store openings. There were also contracted maintenance and renovation works scheduled for its KFC franchise stores in the quarter. The non-alcoholic beverage (NAB) segment was boosted by sales volume growth of 5.4% y-o-y. The segment was EBITDA positive in FY19 compared to a loss in FY18. However, this was slightly offset by an increase in corporate income tax due to deferred tax.
  • Overall, PATMI loss for the segment narrowed to Bt1,324m (+20.8% y-o-y) in FY19.

Debentures with higher interest rates.

  • The company had issued Bt53b debentures in FY19 with tenors ranging from two to 10 years, after refinancing on bridging loans. Sizeable repayments are scheduled for 2022.


  • Cut FY20-21 earnings forecasts by 5.1 and 8.9% respectively, factoring a slightly higher finance cost as well as lower associate contributions.


  • Maintain HOLD but with a revised SOTP-based target price of S$0.90, rolling forward to FY20.
  • We value:
    • the spirits business at 17x EV/EBITDA, in line with global peers’;
    • the beer business at a revised 15x EV/EBITDA, in line with ASEAN peers’ average;
    • the NAB business at 2x EV/sales, a discount to peers’ 3.0x as Thai Beverage’s NAB business is still loss-making; and
    • the food business at 14x EV/EBITDA, in line with local peers’.
    • FRASERS PROPERTY LIMITED (SGX:TQ5) and FRASER AND NEAVE, LIMITED (SGX:F99), in which THBEV owns 28% each, are valued based on market value.
  • Entry price: S$0.78.
  • The stock is trading at 19.3x FY20F PE, close to its 5-year historical mean level. See Thai Beverage Share Price; Thai Beverage Target Price.


  • Consumption growth from government stimulus.
  • Gaining market share in the beer segment.
  • M&As.

Lucas Teng UOB Kay Hian Research | 2019-11-25
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.90 UP 0.870