Thai Beverage - CGS-CIMB Research 2020-05-16: 2QFY20 Broadly In Line

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - 2QFY20 Broadly In Line

We deem Thai Beverage's 1HFY9/20 core net profit of THB14.5bn broadly in line at 70.4%/62.1% of our/market FY20F, as 2H20F could be weak, in our view.
Better spirit margins helped hold 1HFY9/20 net margins up, despite weaker sales growth and volumes. An interim dividend of THB0.10 was declared.
We reiterate our HOLD call and SOP-based Target Price of S$0.70 as we think the true test will be 2H volumes and performance.

Thai Beverage (SGX:Y92)'s 1HFY9/20 revenue fell 3.9% y-o-y to THB142.6bn largely on declines in Thai Beverage’s beer revenues which shrank c.23.5% in 2Q, and c.11% in 1HFY9/20 – driven largely by weaker SABECO revenues. Nevertheless, 1HFY9/20 EBIT rose c.5.7% to c.THB18bn largely on better GP margins within the spirits business (due to a better product mix) and lower opex spend (1HFY9/20 operating costs fell 6.3% y-o-y).
Thai Beverage's 1HFY9/20 core net profit improved to THB14.5bn (+9.5% y-o-y), broadly in line with our 1HFY9/20F estimate of THB13.9bn.

In 2QFY9/20, overall spirit volumes fell c.6% due to weaker Thai white spirit sales and continued weak Myanmar spirits sales (since 1QFY9/20).
For 2QFY9/20, Thai beer volume growth held up at 1.6% y-o-y; SABECO saw a y-o-y volume shrinkage of 42% from the impact of Vietnam's drunk-driving decree, and early impact of Covid-19.
In 1HFY9/20, overall spirit volumes fell 1% (slightly lower than our -2% estimate) while beer volumes fell c.13% (versus our -6.5% estimate).

While Thai Beverage guided that the impact of Covid-19 was hard to quantify at this stage, we think Apr 20 was a potentially slow month for Thai alcohol sales due to the periodic alcohol bans in the month of Apr. Alcohol sales have resumed somewhat in May 20 but Thai Beverage gave no further guidance.
During its 1QCY20 analyst briefing, SABECO guided that the impact of the fake news regarding the ownership of its company is gradually easing which, coupled with the containment of Covid-19, could eventually help stem volume declines going forward. In the coming months, Thai Beverage mentioned that it will continue to monitor its costs closely given the uncertain times.

Thai Beverage is currently trading at a forward P/E of 15.3x, likely pricing in the potential impact of Covid-19, in our view. We reiterate HOLD and would watch for the impact on its volumes in the coming quarters; the stock also lacks M&A catalysts. Our SOP-based Target Price is unchanged at S$0.70.
Thai Beverage has announced that it is moving to half yearly financial reporting (next report will be its full-year announcement in Nov 20) but will look to provide updates in the interim.
See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.
Upside risks are a swifter recovery in consumption volumes and quicker-than-expected M&As, involving Sabeco/F&N (SGX:F99)/Frasers Property (SGX:TQ5).
Downside risks include a longer-than-expected slowdown in volumes and lower dividends.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-16

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.700 SAME 0.700