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


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.

The Positives

Recovery in spirit sales.

  • 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.

Margins spiked for beer.

  • 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.

Highly cash-generative; raised final dividend.

  • 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.

The Negative

Sabeco volumes still weak.

  • 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.

Maintain BUY with higher target price of S$0.86, up from S$0.82

Paul Chew Phillip Securities Research | 2020-11-30
SGX Stock Analyst Report BUY MAINTAIN BUY 0.86 UP 0.820