THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - Defensive Despite COVID-19
On track to deliver; Maintain BUY
- Thai Beverage (SGX:Y92)'s 1HFY21 PATMI of THB14.4b is ahead of MKE/consensus estimates at 54/55%. This was driven by lower-than-expected effective tax rate of ~ 17% due to the absence of tax expenses relating to restructuring of its beer business. We raise our Thai Beverage's FY21-23E earnings per share forecast by 4% to reflect this. As a result, target price for Thai Beverage is raised to S$0.99, pegged to 20x FY21E P/E.
- With 48% upside, BUY.
Spirits undisturbed by COVID-19
- Thai Beverage's 1HFY21 revenue of THB131.3b (-4.3% y-o-y) was in line with MKE/consensus estimate. The decline was mainly due to a fall in sales of beer (-5.1% y-o-y to THB54b), non-alcoholic drinks (-12.6% to THB7.6b) and food (-20.7% to THB2.8b) due to the impact of new COVID-19 cases in Thailand.
- However, its spirits business remained the biggest profit driver. The division’s revenue (-0.6% y-o-y to THB63.9b) continued to remain resilient, while net profit margin saw a 0.8ppt expansion to 20.1% due to prudent cost controls. Sales volume remained stable at 355m litres (-1.2% y-o-y) as off-premise (at home) consumption continued to be the driver for this segment.
Beer business: margin expansion continues
- Despite lower sales volume of 1,145m litres (-5.3% y-o-y) amid temporary closure of bars and entertainment venues, Thai Beverage is ahead of its peers as the industry saw a 10% y-o-y decline in volumes. The beer division saw 2ppt net margin expansion to 4.1%. A 17% drop in distribution costs drove this, as big events promotions and advertisements are restricted during COVID-19 period.
- Management has shifted its promotional spending to drive off-premise sales, which has been a key strength of Thai Beverage.
Strong brands with cheap valuation
- Against the backdrop of its resilient results, Thai Beverage declared an interim dividend of THB0.15, (+50% y-o-y). Thai Beverage's share price continued to trade at 15x FY21E P/E, which is -1 standard deviation below its historical average.
- See
- We believe subsequent net margin expansion from its beer division and the post-COVID consumption recovery could help narrow the P/E gap. Thai Beverage's portfolio of top mass-market brands is also well positioned to capture post-COVID recovery, driven by easing restrictions of on-premise consumption.
Kareen Chan
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-05-17
SGX Stock
Analyst Report
0.99
UP
0.950
