THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
Thai Beverage - Cheers To Thailand’s Reopening; Expected Lifting Of Alcohol Ban
- Thailand’s government plans to reopen the country’s international borders to 10 countries in a bid to revitalise its battered tourism sector. The authorities are also considering lifting Thailand’s ongoing alcohol ban in restaurants. With the arrival of vaccinated tourists, we think this would help boost alcohol consumption and volume in Thailand. In our view, this remains largely underappreciated by the market given Thai Beverage (SGX:Y92)’s attractive valuation.
- Maintain BUY with a target price of S$0.92.
Thailand revealed plans to partial reopening of international borders.
- Thailand’s government has revealed plans to reopen Thailand’s international borders to 10 countries in a bid to revitalise Thailand’s battered tourism sector. From 1 Nov 21, vaccinated travelers from 10 “low risk” countries would be allowed to enter Thailand without the mandated 7-day quarantine currently in place. Vaccinated foreign arrivals from these countries would need a negative pre-departure PCR swab test from their country of origin and once again upon their arrival in Thailand. Upon which, vaccinated travelers are then allowed to roam within the country. Some countries on the list include the US, Germany, the UK, China and Singapore.
- It was noted by Thailand’s prime minister that the list of countries may be expanded in Dec 21 and Jan 22 depending on the success of the initial phase of reopening.
Expected lifting of alcohol ban.
- Aligned with the reopening of international borders, Thailand’s government has also confirmed that authorities are considering lifting Thailand’s ongoing alcohol ban in restaurants by 1 Dec 21 to boost the tourism sector and in time for the new year celebrations. Furthermore, bars and nightlife venues could also reopen as more tourists arrive due to the new relaxed travel restrictions.
- Currently, with the exception of Phuket, consumption and the sale of alcohol are banned in restaurants while bars and nightlife entertainment venues have been ordered to close to prevent a potential spread of COVID-19 infections.
Phuket first, Thailand next.
- We expect Thailand to reopen with the same country’s devastated tourism sector.
Spirits: Aiming to be in high spirits……
- With 90% domestic market share for spirits, Thai Beverage is set help support Thai Beverage’s on-trade and off-trade spirit volumes from FY22 onwards.
…… with a trip to the bar.
- With a two-third portfolio split to the cheaper and widely-consumed off-premise white spirits, Thai Beverage’s spirits segment has segment would help lift Thai Beverage’s overall earnings moving forward.
Beer: Expect a recovery in volume but little impact.
- Although trending upwards, Thai Beverage’s entertainment venues in Vietnam, which remains closed, rather than Thailand. Thus, we see little impact on Thai Beverage’s overall net profit.
Thai Beverage - Valuation & Recommendation
- Maintain BUY rating on Thai Beverage with value:
- Thai Beverage's spirits business at 17x EV/EBITDA, lower than global peers,
- Thai Beverage's beer business at 16x EV/EBITDA, in line with ASEAN peers,
- Thai Beverage's NAB business at 2.5x EV/sales, and
- Thai Beverage's food business at 14x EV/EBITDA, in line with local peers.
- Frasers Property (SGX:TQ5) and F&N (SGX:F99), in which Thai Beverage owns 29% each, are valued based on market value.
- We reckon Thai Beverage remains attractively priced at -1 standard deviation to its mean P/E and EV/EBITDA, backed by an expected earnings recovery underpinned by favorable tailwinds.
- See
- Catalyst: Expansion of the “low-risk” countries list, M&As/potential spinoff listing.
Llelleythan Tan
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-10-22
SGX Stock
Analyst Report
0.920
SAME
0.920
