Thai Beverage - OCBC Investment 2021-02-18: Proposed Spin-off Listing Of Its Beer Business

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THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - Proposed Spin-off Listing Of Its Beer Business

• Total sales volume fell 10.5% y-o-y.
• Spirits remained resilient.
• Beer’s net profit improved 91.2% y-o-y on prudent cost control.

Thai Beverage's 1QFY21 results broadly in-line with expectations

• Thai Beverage (SGX:Y92)’s 1QFY21 (Oct 2020 to Dec 2020) revenue decreased by 5.1% y-o-y to THB 71.8b due to weaker sales from Beer, Nonalcoholic and Food business, while Spirits’ revenue grew marginally at 1% y-o-y.
• Total sales volume was down 10.5% y-o-y, impacted by
  1. resurgence of COVID-19 in Thailand;
  2. adverse weather conditions in Vietnam;
  3. a later Tet; and
  4. new drunk driving law in Vietnam.
• Net profit, however, increased by 3.6% y-o-y to THB 9.5b while PATMI was up 0.5% y-o-y to THB 8.5b in 1QFY21, which translates to 31% of our initial full-year forecast, generally in-line with our expectations.

Spirits remained resilient due to its off-premise consumption nature

• In terms of Thai Beverage's segment performance, Spirits remained resilient due to its off-premise consumption nature and strong product portfolio and distribution network. Its 1QFY21 revenue was up 1% y-o-y while net profit grew 3.2% y-o-y on lower operating expenditure.
• While Beer saw a 9% decline in sales revenue, net profit improved 91.2% y-o-y, thanks to lower advertising and promotion expenses, staff costs and the adoption of TFRS 16 financial reporting standard.
• For the non-alcoholic beverage segment (NAB), 1QFY21 revenue fell 12.0% y-o-y on lower sales volume (-13.1% y-o-y), but net profit improved 16.2% y-o-y due to lower transportation costs.
• Separately, the Food business was weak due to bans on dine-in at restaurants and closure of department stores and restaurants. For 1QFY21, the Food business posted a 19.3% and 90.3% y-o-y decline in revenue and net profit respectively.

Proposed listing of BeerCo could help unlock values and pare down debt of ThaiBev

• Thai Beverage announced the proposed listing of BeerCo for up to ~20% of the total number of issued ordinary shares of BeerCo on SGX.
• BeerCo produces, distributes, and sells beer in Thailand and Vietnam and is an indirect wholly-owned subsidiary of Thai Beverage. The proceeds from the proposed IPO could be used to pare down debt, grow Thai Beverage’s business segments and also aid in the potential acquisition of the remaining 36% of stakes in Sabeco from the Vietnam government should the government decide to sell their stakes in the future.
• Based on EV/EBITDA multiple range of 14- 24x and 2 years EBITDA CAGR of 5-11% for BeerCo, we estimate Thai Beverage’s fair value post IPO could be in the range of S$0.82-1.15, and net debt to equity could fall from 1.0x as at the end of FY20 to 0.6-0.8x post IPO with potential IPO proceeds of S$1.8-3.5b.
• After adjustments, our fair estimate for Thai Beverage increases from S$0.89 to S$0.91.
• See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-02-18

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