Thai Beverage - CGS-CIMB Research 2021-02-11: 1Q21 In-line; Beer IPO Still Main Catalyst

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - 1Q21 In-line; Beer IPO Still Main Catalyst

Thai Beverage's 1QFY21 net profit of THB8.5bn was in line at 31.7% of both our and consensus’ FY20F net profit of THB26.7bn.
Cost savings helped to support 1QFY21 net margins despite the weaker sales growth (-5.1% y-o-y).
We think a successful beer segment listing could unlock Thai Beverage's valuations and act as re-rating catalyst. Maintain ADD.

Thai Beverage (SGX:Y92)’s 1QFY21 (Oct 2020 to Dec 2020) revenue fell 5.1% y-o-y to THB71.8bn, largely on declines in its beer, non-alcohol and food revenues which fell 9%, 12% and 19.3% y-o-y, respectively. See Thai Beverage's announcements.
However, lower distribution (-c.13% y-o-y) and administrative (-c.17% y-o-y) costs in the quarter led to better EBIT margins (16.3% vs 13.7% in 1Q20), keeping Thai Beverage’s bottomline mostly intact (+1% y-o-y) and within our/consensus’s expectations.
We leave our forecasts largely unchanged.

Only spirit volumes showed resilience in 1QFY9/21 (+0.3% y-o-y), as Thai Beverage’s Thai spirits consumption are mostly consumed off-trade.
Beer volumes fell ~11.6% on declines in
1. Thai volumes of 6.5% y-o-y (following a resurgence of new COVID-19 cases in Thailand in late-Dec 20), and
2. SABECO volumes of 14.3% y-o-y (due to adverse weather conditions in Oct-Nov 20 and later Tet festival period).
Non-alcoholic beverage volumes fell 13% y-o-y.

Last week, Thai Beverage proposed a listing of BeerCo on the Main Board of Singapore Exchange, via a vendor sale of up to ~20% of its issued shares. We believe a successful listing of the beer business could improve Thai Beverage’s (the hold-co’s) gearing (proceeds go to repay debts) and, more importantly, act as catalyst for the valuations of Thai Beverage’s beer assets.
See our previous note: Thai Beverage - CGS-CIMB Research 2021-02-05: Refreshing Its Beer IPO Dreams. We had previously valued the beer assets at an EV (enterprise value) of THB144.5bn with a 30% discount to Thai Beverage’s acquisition price of VND320k/share for its SABECO stake.

Thai Beverage has also announced that it will be participating in its associate Frasers Property (SGX:TQ5)’s rights issue that will amount to S$360m, to be fully funded by debt. See Frasers Property's announcements and our report: Frasers Property Limited - CGS-CIMB Research 2021-02-11: Proposing A Rights Issue. We await further details on the potential beer IPO before making any changes to our forecasts and SOP-based target price.
Besides a successful listing of the beer assets, we continue to like Thai Beverage for its spirits business which we believe could be a main beneficiary of the potential down-trading behaviour in Thailand.
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, resumption of M&As involving F&N (SGX:F99) and Frasers Property (SGX:TQ5), and higher valuations for the BeerCo listing.
Downside risks: Sluggish volume recovery and lower dividends.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-11

SGX Stock Analyst Report ADD MAINTAIN ADD 0.870 SAME 0.870