Brokers' take: UOBKH maintains 'buy' on ThaiBev, cuts TP due to lower beer segment valuation

UOB Kay Hian (UOBKH) has maintained its "buy" call on Thai Beverage Public Co (ThaiBev) Y 92 due to its attractive price and stable core business in spirits, the brokerage said in a report on Friday (Feb 4).

However, the beverage company's target price (TP) was lowered to S$0.85 from S$0.92, given the lower 13 times Ebitda (earnings before interest, taxes, depreciation and amortisation) multiple for its beer segment.

Analyst Llelleythan Tan did note that a potential initial public offering of this business, valued at around US$5 billion, in the second half of FY2022 "may unlock value for the group".

The new TP represents a 29.8 per cent upside to ThaiBev's last close price of S$0.655 on Thursday, which is currently below its mean price-to-earnings ratio by 1 standard deviation, Tan observed. The stock is also one of UOBKH's alpha picks for February.

The analyst also lowered the FY2022-2024 net profit forecasts slightly by 1-1.5 per cent on falling consumption volumes caused by an Omicron outbreak and temporary closure of Thailand's borders in Q1 FY2022.

Despite the lower longer-term forecasts, Tan expects ThaiBev's Q1 FY2022 spirits revenue and Ebitda to grow 4-5 per cent year on year, due to its domestic spirits market share of 90-95 per cent and white spirit sales volumes rising 13.9 per cent year on year, and despite mixed spirits sales volume declining 11.1 per cent year on year.

This Q1 growth is projected to make up 30 per cent of Tan's spirits forecasts for FY2022, which indicates revenue growing 3 per cent and Ebitda increasing 4.7 per cent from the year-ago period on the back of the higher spirits consumption, relaxed domestic Covid-19 restrictions and rising foreign tourist arrivals.

As for ThaiBev's beer segment, he projects a second quarter FY2022 recovery, as the reopening of certain entertainment venues as restaurants serving beer was hindered by temporary tightening of measures in late-December 2021.

While this is likely to boost ThaiBev's full year FY2022 beer revenue and Ebitda by 3 per cent and 7.8 per cent respectively, Tan still expects a muted Q1 growth in revenue and Ebitda of 0-1 per cent year on year.

Meanwhile, Tan reckons ThaiBev's ongoing efforts to promote its non-alcoholic beverages (NAB) will likely boost its FY2022 Ebitda for the NAB segment to 4.2 per cent year on year, while restaurant reopenings will allow its food segment to grow 14.2 per cent.

ThaiBev shares rose about 0.8 per cent or S$0.005 to finish Friday at S$0.66.

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