Thai Beverage - UOB Kay Hian 2021-02-15: 1QFY21 Solid Earnings; Awaiting A Potential Listing


Thai Beverage - 1QFY21 Solid Earnings; Awaiting A Potential Listing

  • Thai Beverage announced net profit of Bt8.5b, up 0.5% y-o-y, above expectations. The spirits volume remained resilient while cost control measures continue to improve margins.
  • A potential spin-off listing of the group’s beer business, ASEAN’s leading brewery by volume, looms on the horizon. It could help unlock value for Thai Beverage.
  • Maintain BUY with a 12% higher target price of S$0.95.

Thai Beverage's 1QFY21 earnings above expectations.

  • Thai Beverage (SGX:Y92) reported 1QFY21 (Oct 2020 to Dec 2020) net profit of Bt8.5b, up 0.5% y-o-y, forming 33% of our estimates, above expectations. The continued cost control efforts have allowed profitability to remain impressive, given the y-o-y comparison to a pre-COVID-19 high base year end period in 1QFY20.
  • 1QFY21 results is a one-time release of the group’s quarterly financial statements in view of the proposed spin-off listing of BeerCo (Thai Beverage’s beer business).

Continued cost mitigation efforts.

  • 1QFY21 turnover was lower at Bt71.8b (-5.1% y-o-y) due to the impact of the new wave of COVID-19 cases. However, Thai Beverage noted the expansion of private consumption following the gradual recovery in household purchasing power and support from government stimulus measures in 1QFY21.
  • Cost control efforts continue to be in place, the SG&A expense-to-revenue ratio fell to 13.3% in 1QFY21 (-1.5ppt y-o-y) and we estimate improved EBITDA margins of 20.1% (+3.0ppt y-o-y; +1.9ppt q-o-q).

Sprits: Resilient.

  • Spirits volume was flat (+0.3% y-o-y; +10.5% q-o-q) while revenue increased slightly (+1.0% y-o-y). Margins saw a slight increment and EBITDA margin was at 26.5% in 1QFY21 (+1.0ppt y-o-y; +2.2 ppt q-o-q).

Beer: Gradual recovery.

  • Beer volume (-11.6% y-o-y; +10.5% q-o-q) is still in a gradual recovery on a q-o-q basis, though 1QFY21 is seasonally stronger. Vietnam was affected by adverse weather conditions in Oct-Nov 20. Thai Beverage continues to make inroads in managing costs in Vietnam, seeing cost savings in transportation activities, lower provision for bonuses and more flexible compensation structures.

Food: Returning profitability; NAB: Steady.

  • For the food segment, 1QFY21 recorded a net profit, reversing from a small net loss position in 4QFY20 by enhancing home delivery and takeaway options, as well as implementing cost-saving projects. The non-alcoholic beverage (NAB) business recorded EBITDA growth of 11.0% y-o-y.

Potential listing of BeerCo

  • A potential public offering could be up to approximately 20% of the issued shares of BeerCo. Thai Beverage also noted reasons for the proposed listing including:
    1. significant growth potential in the beer business;
    2. improvement of the financial position of Thai Beverage; and
    3. unlocking shareholder value.
  • There is no certainty or assurance that the proposed spin-off listing will materialise. We note that ASEAN peers in the beer business trade at approximately 17x 2021F EV/EBITDA, while larger APAC peers trade at 20x 2021F EV/EBITDA.

BeerCo details released.

  • Thai Beverage also released 1QFY21 results for BeerCo. The entity recorded PATMI of S$77.4m (+72.4 % y-o-y). According to the group, BeerCo is the leading brewer in ASEAN by volume, with 23.4% of market share.

Subscription to Frasers Property rights.

Raise Thai Beverage's FY21-23 earnings forecasts by 2-3%.

  • We account for better margins given better-than-expected cost management, whilst factoring increased financing from the Frasers Property rights issue.

Maintain BUY with a higher SOTP-based target price of S$0.95.

Lucas Teng UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-02-15
SGX Stock Analyst Report BUY MAINTAIN BUY 0.950 UP 0.850