THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - Value BUY For A Strong Portfolio Of Brands
- Trading at 16x FY21F P/E (-1SD from its historical mean), we think Thai Beverage's valuation is attractive given the group’s defensive earnings profile and strong hold of markets in Thailand and Vietnam.
- Moving into FY21F, we expect Thai Beverage's earnings to be supported by a steady improvement in local demand on the back of recovery in on-premise consumption.
Solid fundamentals.
- Thai Beverage (SGX:Y92) is the largest alcohol beverages producer in Thailand and one of the leading beer producers in Vietnam. Its diversified portfolio of brands and products allow it to cater to different segment groups and price points, maintaining its strong hold in market share and providing earnings resiliency. An extensive distribution network also enables the group to reach out to a wide base of customers.
- Earnings defensiveness – especially from its spirit segment – has helped Thai Beverage to deleverage, improving net debt to equity to ~1.0x in FY20.
Attractive valuation.
- Thai Beverage's share price is trading at 16x FY21F P/E, -1SD from its historical mean. We note that the Straits Times Index (STI) has recovered > 25% since the low in March but the group continues to underperform the index. We think this underperformance is unjustified given its healthy recurring earnings growth in FY20 despite COVID-19 challenges.
- We believe its strong brand equity, resilient earnings and improving leverage ratio should drive share price recovery in FY21F.
Better prospects for FY21F.
- Post-COVID-19, recovery in on-premise consumption should help raise demand for Thai Beverage’s beer, non-alcohol beverages and restaurant segments. Its Vietnam subsidiary, SABECO should also improve on the back of the absence of negative fake news and consumers being accustomed to Decree 100, which increased sanctions for drunk-driving.
- Reiterate BUY on Thai Beverage with 12% upside to our target price and ~3% FY21 dividend yield.
- See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.
- Thai Beverage’s ability to keep advertising and promotional (A&P) expenses under control amidst rising economic activities and potential intensifying of competition is likely to bring about further upside to earnings.
- Key risks include slower-than-expected recovery of economy and weakening of consumer sentiment if COVID-19 pandemic and protests prolong over an extended period of time.
- Thai Beverage is our Top Pick for the Singapore consumer sector. See: Singapore Market Strategy - RHB Invest 2020-12-14: Key Themes In 2021 & Stock Picks.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-12-30
SGX Stock
Analyst Report
0.820
SAME
0.820
