Thai Beverage - CGS-CIMB Research 2020-11-26: Don’t Stop Drinking

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

Thai Beverage - Don’t Stop Drinking

  • Thai Beverage's FY20 net profit (THB24.9bn) beat our/Bloomberg consensus forecasts (THB21.5bn/THB22.8bn), on higher GPMs and cost containment efforts.
  • We think Thai Beverage benefits from down-trading in Thailand and Vietnam due to its mass market focus. FY21F sales could be aided by Thai stimulus.
  • We see Thai Beverage as FY21F’s recovery proxy play. Reiterate ADD with a higher SOP-based target price of S$0.87.



Saved by stringent cost containment efforts

  • Thai Beverage (SGX:Y92)'s FY20 (Oct 2019 to Sep 2020) revenue fell 5% y-o-y to THB253.5bn on lower beer revenues (-11.3% y-o-y) and volumes (-12.7% y-o-y) due to a large drop in SABECO‘s volumes which were hit by various issues, besides the COVID-19 outbreak. Despite this, better spirit GP margins and stringent cuts in selling costs (-14% y-o-y) led to higher FY20 EBIT of THB34.6bn (+9% y-o-y) and FY20 core net profit of THB24.9bn (c.+7% y-o-y).
  • We were especially heartened by the growth in spirit revenue (+2.2% y-o-y) and volumes (+0.2% y-o-y) as we had expected volume declines.


Potential down-trading could benefit Thai Beverage

  • We note slight decreases in the implied 2HFY20 ASPs of Thai Beverage’s spirits and beer divisions (vs. 1HFY20). Besides that, according to official statistics, select Thai white spirits volumes grew 2.2% y-o-y in 9MCY20 vs. select mixed spirits (more expensive spirits) that fell 18.3% y-o-y, indicative of down-trading in Thailand.
  • Similarly, during its 3Q20 analyst briefing, SABECO mentioned that the c.29% y-o-y drop in 9MCY20 revenues was due to volume declines and down-trading. We think Thai Beverage could be one of the beneficiaries of such trends as it has 90% market share in the Thai spirits space, and is a mass player for beers in Thailand and Vietnam.


Stimulus could aid Thai volumes; new products could lift Vietnam

  • In 2019, Thailand’s domestic alcoholic industries improved y-o-y partly due to the government’s stimulus measures. We think this could re-occur in 2021F given that the government has initiated several stimulus plans, some of which kicked off in Oct 2020.
  • SABECO has launched Bia Saigon Chill (to compete in the sub-premium space) and Bia Lac Viet (a mass product which could be good in a down-trending environment) which could give it a broader range of products in FY21F.

Reiterate ADD; proxy for consumption recovery






Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-26
SGX Stock Analyst Report ADD MAINTAIN ADD 0.87 UP 0.700



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