Brokers' take: Phillip downgrades ThaiBev to 'accumulate' on slower recovery expectations

PHILLIP Securities has downgraded its call on Thai Beverage (ThaiBev) Y92 from "buy" to "accumulate" with a revised target price of S$0.765, down from S$0.86 previously.

The revised target price is pegged to an 18 times FY2022 price-to-earnings (PE) ratio estimate, which is the stock's 5-year average.

In a Monday (Nov 29) report, analyst Paul Chew said the downgrade comes on a slower-than-expected post-lockdown recovery for ThaiBev as the group's latest set of FY2021 earnings missed expectations.

In particular, Chew believes the lower volume of spirits over the financial year came as a surprise to ThaiBev, which reported strong volumes in the previous quarter.

With the reopening of nightlife entertainment venues occurring only in January 2022, he reckons that consumer sentiment and income levels will "remain fragile" in the months following Thailand's lockdown.

Chew also lowered ThaiBev's FY2022 earnings per share (EPS) by 10 per cent to S$0.0425 on reduced profit after tax and minority interests estimates due to expectations of slower recovery in consumer spending.

"Recovery is underway but the pace may remain tepid in the near term. The lockdown is taking a toll on consumer sentiment and income," said Chew, who believes the impact of border reopenings and economic recovery may only become more material in H2 of FY2022.

On the other hand, CGS-CIMB has raised its target price for ThaiBev to S$0.91, up S$0.07 or 8.3 per cent from S$0.84 on valuation rollover to the end of FY2022 but reiterated its high-conviction "add" call in its report on Friday (Nov 26).

The brokerage has chosen ThaiBev as its top pick for the sector as it sees the stock as a laggard recovery play.

Analyst Ong Khang Chuen noted that at the price of S$0.695, ThaiBev trades at an "undemanding" valuation of 14.4 times CY2022 PE ratio. This is 1.2 standard deviations below the 10-year historical mean, compared to its peers' valuation of 28 times.

The revised target price comes after Ong raised ThaiBev's FY2022-2023 EPS estimates on higher margin assumptions, as the group plans to further improve its beer business margins through the launch of more premium products as well as enhanced advertising and promotion spend efficiency.

The company has plans to roll out price hikes from the first quarter of FY2022 over the next 2 quarters. Ong believes ThaiBev will continue its "prudent cost management", particularly when it comes to raw material costs and packaging costs.

"A successful listing for the beer unit could help pare ThaiBev's gearing level, and potentially unlock value for shareholders," he said, noting that the group recently announced plans to resume its BeerCo initial public offering.

Shares of ThaiBev were trading S$0.015 or 2.2 per cent lower at S$0.68 as at 1.47 pm on Monday.

READ MORE:

• ThaiBev defers potential spin-off and listing of BeerCo subsidiary
• Brokers' take: Maybank KE initiates 'buy' on ThaiBev on post-Covid recovery hopes
• Brokers' take: Maybank KE raises ThaiBev target price on post-Covid recovery prospects