Thai Beverage - OCBC Investment 2020-02-17: Strong Domestic Demand; Weak Sabeco Sales

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

Thai Beverage - Strong Domestic Demand; Weak Sabeco Sales

  • Sabeco weighed on beer performance.
  • Non-alcoholic beverage segment turned profitable while food business remained at loss.
  • Spirits continued to grow.



1QFY20 PATMI up 14% y-o-y

  • Thai Beverage (SGX:Y92)’s results beat expectations due to stronger domestic sales volume and a decrease in advertising and promotion expenses (A&P). 1QFY20 revenue increased 4% y-o-y to THB 75.7b while gross profit improved 6% y-o-y to THB 21.6b. Net operating profit improved 30% y-o-y to THB 9.3b.
  • 1QFY20 PATMI showed a 14% y-o-y improvement to THB 8.4b, which translates to 32% of our initial full-year forecast.


Spirits remained the key growth driver

  • In terms of segment contribution, spirits showed a 8.8% y-o-y increase in revenue to THB 34.4b on the back of stronger sales volume (+4.2% y-o-y) while PATMI grew 25.6% y-o-y to THB7.1b in 1QFY20.
  • For non-alcoholic beverage segment (NAB), revenue was up 4.4% y-o-y while EBITDA and PATMI turned from loss to profit this quarter due to higher sales volume and lower A&P expenses. The Beer segment remained challenging. Despite a 0.2%/22.9% y-o-y increase in revenue and EBITDA, PATMI fell 56.6% y-o-y due to weaker performance from Sabeco. Total sales volume for beer including Sabeco’s beer decreased 0.1% to 731.4 million litres in 1QFY20. Stripping out Sabeco’s contribution, sales volume would have increased 13.5% to 253.1 million litres.
  • Separately, the food business posted a 1.5% y-o-y increase in revenue to THB 3.9b while PATMI remained weak, which dropped 13.2% y-o-y due to higher A&P expenses.


Recent selloff likely overdone

  • Thai Beverage's share price fell 11.8% YTD, largely due to the 9.8% correction after Sabeco announced its full year results in Jan with 6% y-o-y fall in revenue due to weaker sales volume, dragged by the new drunk driving laws in Vietnam effective 1 Jan 2020 and COVID-19.
  • While Sabeco’s performance is likely to be lackluster in 2020, Thai Beverage’s beer business only contributed 3.5% of FY19 PATMI. Management remained confident on Sabeco’s outlook given its strong branding in off-premise and rural areas.
  • Given the outbreak of COVID-19, management expects to see larger impact from its Food segment but its contribution to 1QFY20 was minimal at 1.8%. We see any additional stimulus package from Thai government as positive on domestic consumption.
  • After adjustments to account for the impact from COVID-19, our fair value estimates decreases slightly from S$0.91 to S$0.90.
  • See Thai Beverage Share PriceThai Beverage Target PriceThai Beverage Analyst ReportsThai Beverage Dividend HistoryThai Beverage AnnouncementsThai Beverage Latest News.





Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-02-17
SGX Stock Analyst Report BUY UPGRADE HOLD 0.90 DOWN 0.910



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