THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - Tougher 3Q Ahead; Downgrade To NEUTRAL
- Thai Beverage's 2QFY20 (Sep) result was in line with our expectation. Core PATMI grew 5% y-o-y to THB6.1bn on the back of an effective cost control, despite a 12% sales decline.
- 1H20 core PATMI of THB14.5bn met 59% of our previous FY20F estimate. However, we downgrade our recommendation as the outlook is less rosy with the extension of the alcohol ban in April and a downgrade of the economic forecast of Thailand.
Thai Beverage's decent set of 2Q results
- Thai Beverage (SGX:Y92) achieved a decent set of 2Q results despite slower sales. However, we note that the sales decline was largely attributed to SABECO which saw a 47% y-o-y drop in revenue for the quarter. Its domestic business remained fairly resilient.
- While the spirits business saw a 4% y-o-y decline in 2Q20 sales, the decrease in SG&A costs helped to prop up margins and lifted the segment’s profit by 9%. Its domestic beer grew 1.6% in spite of the challenging operating environment as it gained market share for the last six consecutive months. EBIT for the NAB division also turned positive as consumers stocked up on essential goods during the period, while the Food division turned to losses as a result of social distancing measures.
Outlook less rosy.
- Following our previous report, Thai Beverage - RHB Invest 2020-04-16: Pouring Water On Songkran, we note that the Thai Government has extended a nationwide ban on alcohol sales. The ban was then lifted on 3 May but on-premise drinking is still not allowed. The extension of the ban would negatively affect Thai Beverage’s sales but this will be partially offset by consumers stocking up in May.
- Moving into the second half of 2020, the negative impact of COVID-19 on the economy and weaker farm income as a result of the drought could continue to slow alcohol demand in Thailand.
Change in forecasts and TP.
- We cut our FY20-22F earnings by 8-10%. Downgrade to NEUTRAL with a lower Target Price of SGD0.72 from SGD0.79, 8% upside and c.3% yield.
- Overall, we expect Thai Beverage’s earnings to remain fairly stable despite the challenging operating environment. Investors could look to accumulate when share price is closer to SGD0.60, which implies 15x FY20F P/E (-2SD from mean), for a better risk-reward ratio.
- See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.
- Key risks include alcohol ban reinstatement if COVID-19 cases escalate, slower-than-expected economic recovery in Thailand, disruption in supply chain, market sell down amidst a worsening COVID-19 outlook.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-05-18
SGX Stock
Analyst Report
0.72
DOWN
0.790
