Brokers’ take: DBS reinstates coverage on ThaiBev with ‘buy’ on reopening upside
Yong Hui Ting
ON Friday (Nov 18) DBS reinstated coverage on Thai Beverage Public Company (Thai Bev) with a “buy” call and a target price of S$0.84 as analysts foresee benefits from reopening and strong demand within the region.
Against the counter’s trading price of S$0.62 as at the midday trading break on Friday, DBS’ target price represents a 35.5 per cent upside.
Analysts think the group’s performance could get a lift from tourism revival and strong domestic demand in Thailand, as well as robust gross domestic product (GDP) growth in Vietnam driving up alcohol consumption.
Further, Thai Bev’s refinancing risks are low and it has a strong cash flow to leverage, noted the analysts. This is supported by the fact that the group has a debenture of between 22 billion (S$843 million) and 26 billion baht to pay off over the next two years, which can be repaid with its yearly operating free cash flow averaging at least 36 billion baht each year.
The research house believes the counter is trading at an estimated 14 times against its price to earnings (PE) ratio for FY2023, which is one standard deviation below its five-year mean forward average.
Analysts believe that the group’s “potential as one of South-east Asia’s largest F&B player” have not been priced in at the current price levels and projected a 9 per cent year on year growth for its net profit in FY2022. Thai Beverage is expected to release its FY2022 financial results next week.
“We believe the prospects of this counter are overlooked and clouded by misplaced concerns about gearing, growth and margin pressures,” said the analysts.
Key risks, however, include a new Covid-19 variant, unexpectedly high excise taxes and aggressive sales promotions by competitors.
The counter was up 0.8 per cent or S$0.005 at S$0.62 over the midday break on Friday.
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