Brokers' take: Maybank KE initiates 'buy' on ThaiBev on post-Covid recovery hopes

MAYBANK Kim Eng has initiated coverage on Thai Beverage PCL with a "buy" call and raised its target price to S$0.95 on expectations of the spirits and beer business recovery from Covid-19.

A report on Monday stated that ThaiBev's portfolio of top brands is well poised to capture post-pandemic recovery, driven by the easing of restrictions relating to on-premise consumption. Furthermore, ThaiBev's beer business is positioned for margin expansion as a result of positive operating leverage. Overall, the brokerage is projecting a revenue compound annual growth rate (CAGR) of 6.1 per cent from FY2020 to end of FY2023.

Analyst Kareen Chan noted that ThaiBev's strong presence in the Thailand and Vietnam markets through its portfolio of diversified strong brands could increase the firm's (CAGR) in the spirits and beer market. Some of ThaiBev's portfolio brands include Sangsom in Thailand and Bia Saigon in Vietnam. ThaiBev holds about 90 per cent of Thailand's spirits market and 43 per cent of Vietnam's beer market, respectively. (See Amendment note)

She added that a possible initial public offering of brewery unit BeerCo as soon as the first half of 2021 could be a near-term re-rating catalyst for ThaiBev. Ms Chan noted that BeerCo's potential listing could be valued at S$10 billion, which could lift ThaiBev's target price by 30 per cent to S$1.24.

The brokerage continues to remain positive on ThaiBev's structural growth post-pandemic. While the report noted that the beer business is sluggish compared to the spirits business, the latter could offset the slowdown because about 80 per cent of the spirits business comes from off-premise sales.

"We believe (ThaiBev's) most profitable spirits business is likely to remain resilient despite Covid-19, driven by consumers' preference for off-premise consumption. This should offset the sluggish demand from the beer business, which is impacted by reduced on-premise consumption due to Covid-19 measures," Maybank KE said.

Shares of ThaiBev added S$0.015 or 2.08 per cent to S$0.735 on Monday.

Amendment note: An earlier version of this article stated that Thai Bev holds about 90 per cent of Thailand's beer market and 43 per cent of Vietnam's spirits markets. It is in fact 90 per cent of Thailand's spirits market and 43 per cent of Vietnam's beer market.