Thai Beverage - Phillip Securities 2020-11-30: A Spirited Performance

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - A Spirited Performance

Thai Beverage (SGX:Y92)'s 4Q20 revenue and earnings were within expectations, with FY20 numbers at 101%/99% of our forecasts. Revenue was up 2%, EBITDA up 31% y-o-y.
4Q20 spirit revenue rose 11% y-o-y on an 8.9% rise in volumes; 4Q20 EBITDA jumped 31% from higher sales and lower marketing costs.
Maintain BUY. Target price raised to S$0.86 from S$0.82 after we increase FY21e EPS by 4%. Our target price remains based on 18x earnings, its 5-year average.
Thai Beverage's operations have defied a challenging economic environment. Company benefitted from consumers’ trade-down to white spirits and aggressive cut to marketing spend. Thai Beverage remains dominant in the spirit market and we expect a rebound in volumes in FY21e.

Thai Beverage's revenue growth came from price increases earlier this year and better volumes as customers traded down to lower-priced white spirits. Alcohol consumption in major cities was hurt by fewer tourists and migrant workers. But workers returning to their homes - mainly in the north-east - drove consumption in the rural areas.
Spirit sales in Myanmar were affected by a second wave of infections which forced about more lockdowns and lower economic activity.

Beer EBITDA margins expanded 4.7% points y-o-y. The company achieved this by slashing marketing expenses, especially given fewer concerts and events to promote its beer brand. It also pivoted to less-costly digital advertising.

Thai Beverage's FY20 FCF was THB32bn, virtually unchanged from FY19. A commendable performance given the tough economic backdrop. Final dividend was raised by 9% to THB0.36.

Sales volume contracted 12.7% y-o-y in FY20. Tight enforcement of new drink-driving regulations in Vietnam, the closure of restaurants and bars and soft consumer sentiment were contributing factors.

Thai Beverage managed to increase its earnings in FY20, ex-one-offs, despite lockdowns, economic weakness and tighter regulations on alcohol consumption. To cope with these, it bludgeoned its marketing and distribution spending, which dropped 14% y-o-y or THB4bn (S$180mn).
For FY21e, we are expecting revenue growth from spirit volume growth of 3% and beer volume growth of 4%. We expect gross margins to improve, primarily from the spirits division. Plans to raise used bottles for white spirits from 30-40% to above 50% should help with packaging costs. These formed 6.7% of FY20 revenue.
Thai Beverage's EBITDA margins in FY21e could also be aided by a continued tight lid on sales and marketing expenses. We expect Thai Beverage to keep costs at almost the same level as last year: 9.8% of FY21e sales vs 9.7% in FY20. If it increases spending at all, it would be to respond to aggressive promotions by competitors.
Elsewhere, Sabeco is expected to make a soft recovery. Any significant pick-up will depend on:
1. the ability of its new Saigon Chill product to compete in the sub-premium category of beers; and
2. the enforcement of regulations on alcohol consumption.

We maintain our BUY, with Thai Beverage's catalysts expected from rebound in spirits volume and beer volumes as economic growth recovers and dine -in activities resume.
We raise Thai Beverage's FY21e EPS) by 4% on account of healthier sales volumes. Our earnings estimates was raised 7% in local currency terms but we dialled back our S$/THB assumptions by 3% points.
Our target price remains based on 18x PE, its average in the past five years.
See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2020-11-30

SGX Stock Analyst Report BUY MAINTAIN BUY 0.86 UP 0.820