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
- We raise our Thai Beverage's FY20-21F earnings forecast as we lift margins given this year’s outperformance, and introduce FY23 forecasts which feature y-o-y net profit growth of 2.2%.
- Although Thai Beverage's share price has recovered, it is still trading below its 5-year -1 s.d. level. We maintain our ADD call on Thai Beverage but lift our SOP-based target price to S$0.87 as we roll forward our valuation to CY22F.
- See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.
- Potential re-rating catalysts include swifter recovery in volumes and the resumption of M&As involving Sabeco, F&N (SGX:F99) and Frasers Property (SGX:TQ5).
- Downside risks: sluggish volume recovery and lower dividends.
- Thai Beverage is also one of CGS-CIMB's Singapore stock picks as highlighted in report: Singapore Stock Picks - CGS-CIMB Research 2020-11-17: Go With The Flow, Don’t Fight The Market.
Cezzane SEE
CGS-CIMB Research
|
https://www.cgs-cimb.com
2020-11-26
SGX Stock
Analyst Report
0.87
UP
0.700
