THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - Drinking In Both Good & Bad Times; BUY
- Thai Beverage (SGX:Y92)’s FY20 (Sep) PATMI was down 2.2% in line with our expectations. Excluding restructuring costs, its THB25.5bn recurring PATMI was spectacular, given the challenges posed by COVID-19.
- The robust earnings were largely driven by a reduction in advertising & promotion (A&P), and helmed by the spirits segment. We expect the strong earnings to continue in FY21, as A&P expenditure and competition normalise, but are mitigated by higher demand from on-trade consumption.
- Maintain BUY on Thai Beverage with higher S$0.82 from S$0.72, implying 10% upside, c.3% yield.
Spirits segment continues to shine
- Spirits segment continues to shine, with PATMI up 15% y-o-y to THB22bn, representing c.86% of Thai Beverage’s recurring PATMI. Sales volume inched up 0.2%, while revenue was up 2% led by product mix and price increases. EBITDA margin grew 1.5ppts to 24.3% with reduction of A&P expenses.
- The spectacular results demonstrated Thai Beverage’s extensive distribution network, strong brand equity, and diverse product portfolio in the spirits space, which allows the segment to continue to deliver a resilient earnings base for the group.
Beer poised for a recovery in FY21F, given FY20’s low base.
- The beer segment saw a more severe impact from COVID-19, due to higher exposure to on-trade consumption. Sales declined 11% y-o-y on the back of a 13% drop in volume.
- Its Vietnam business, Sabeco was further impacted by negative fake news, the implementation of Decree 100 (sanctions for drunk driving), and intensifying competition. Given the low base in 1H20, we expect to see continued positive sales momentum moving into 1H21.
- Thailand’s domestic market was less impacted, with a sales volume decline of 1% in FY20, due to market share gains. We expect A&P for the segment to increase as economic activities and on-trade consumption gradually resume in FY21F. The higher costs should be mitigated by higher demand and improved operational efficiencies, as well as a lower interest rate
Bright spots in non-alcoholic beverages (NAB) and food segments.
- The NAB segment broke even in FY20. Moving into FY21F, we remain optimistic on the segment’s profitability, on improving demand and management’s guidance for the cost structure to stay similar.
- The food segment should also improve from FY20’s low base, as foot traffic gradually improves.
ThaiBev is our top pick for the consumer sector in FY21F.
- We raise our Thai Beverage's FY21-23F earnings forecast by 11-12%, leading to a higher SOP-derived target price of S$0.82. We think valuation is compelling as Thai Beverage's share price is trading at 16x FY21E P/E, -1SD.
- See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-11-27
SGX Stock
Analyst Report
0.82
UP
0.720
