Thai Beverage - Phillip Securities 2021-02-15: Hail Spirits and Cost Savings

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) | SGinvestors.io THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - Hail Spirits and Cost Savings

  • Thai Beverage (SGX:Y92)'s 1QFY21 (Oct 2020 to Dec 2020) revenue and PATMI were within expectations, at 27%/31% of our FY21e forecasts. Revenue is down 5%, PATMI up 0.5% y-o-y.
  • Spirits volume was up a modest 0.3%, with PATMI rising 3%. Spirits is 84% of group PATMI.
  • Beer volumes dipped 11.6% y-o-y but PATMI tripled from aggressive cost-cutting.
  • Downgrade Thai Beverage to ACCUMULATE on account of the recent Thai Beverage's share price appreciation.



The Positives


Resilient spirits divisions.

  • Volume growth in spirits was stable, improving 0.3% y-o-y despite the pandemic in Thailand. Spirits are consumed off-trade or in homes and less affected by closures of entertainment or retail channel. In comparison beer volumes in Thailand fell 6.5% y-o-y.

Aggressive cost cuts especially in beer division.

  • The major driver to earnings growth has been aggressive cost cuts. Total administration and distribution cost for the group contracted 10.6% or THB1.6bn. Bulk of the operating cost cuts came from beer division, where slashed a massive THB1.3bn of cost (or down 26.5% y-o-y.


The Negatives


Sabeco still suffering.

  • Another weak quarter with volumes down 11.6% y-o-y. A combination of Decree 100, a typhoon in October and late Tet (10 days later from a year ago).

Plunge in Frasers Property earnings.

  • 1QFY21 PATMI contribution from associates, Frasers Property (SGX:TQ5) and F&N (SGX:F99), was down 58% y-o-y to THB433mn. There was limited disclosure but lower property development income and weakness in hospitality and retail operations.


Outlook

  • The re-occurrence of COVID-19 in Thailand in December renewed restrictions and lockdowns on gatherings and entertainment activities. On-trade channels were more affected as reflected by soft beer consumption. We expect a gradual recovery in alcohol consumption especially from pandemic and alcohol ban affected FY20. For Sabeco, volumes should improve as the impact from Decree 100 wanes off.
  • With regards to BeerCo listing, FY20 PATMI was S$198mn. If we assume 30x P/E, similar to global peers, the market cap will be S$5.9bn. Assuming 20% stake is sold, interest savings (after tax) is around S$33mn (THB750mn). This is around 3% of our FY21e PATMI. But the 20% dilution will shave around THB250mn off PATMI.
  • Another development is the 37 to 100 rights shares for issue by Frasers Property (SGX:TQ5) at $1.18 per shares. See Frasers Property's announcements. Thai Beverage owns 824.847mn shares (or 28.12%) of Frasers Property. The company has given an irrevocable undertaking to subscribe for their allotted 305.193mn shares. Therefore, Thai Beverage will fork out $360mn for the rights.

Downgrade Thai Beverage to ACCUMULATE with unchanged target price of S$0.86






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-02-15
SGX Stock Analyst Report ACCUMULATE DOWNGRADE BUY 0.860 SAME 0.860



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