Broker's take: UOBKH says lower valuation for ThaiBev's Vietnam beer assets expected

UOB Kay Hian (UOBKH) on Monday said it is reasonable to expect a lower valuation for Thai Beverage Company's beer assets, given Sabeco - its Vietnam brand - had been impacted by drink-driving regulations and Covid-19 restrictions.

The research team's note follows news that ThaiBev has revived plans to list its regional beer assets through an initial public offering in Singapore, people familiar with the matter told Reuters.

UOBKH analyst Lucas Teng said drink-driving regulations are expected to have a more permanent effect on alcohol consumption and could put valuation on a lower range compared with 2019.

"However, Vietnam's young population still makes the market a compelling prospect for growth," he noted.

He said recovery has been encouraging thus far and estimates beer volumes in Vietnam to be approximately 15-20 per cent below pre-Covid-19 levels as at end-FY2020.

UOBKH maintained its "buy" call on the stock with a sum-of-the-parts-based target price of S$0.85. It values the spirits business at 17 times the enterprise value to the earnings before interest, taxes, depreciation, and amortisation (EV/Ebitda). It also values ThaiBev's beer business at 15 times EV/Ebitda, in line with Asean peer's average.

Shares of ThaiBev were trading flat at 77.5 Singapore cents as at 3.22pm on Monday.