Hot stock: ThaiBev shares surge 9% on back of stellar Q1 results; DBS maintains 'buy'

Vivienne Tay
Published Fri, Feb 15, 2019 · 02:31 AM
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SHARES of Thai Beverage (ThaiBev) shot up after the opening bell on Friday, climbing 9.03 per cent or 6.5 Singapore cents to 78.5 cents at 9.08am, a six-month high. Around 26.7 million shares changed hands.

The boost comes on the back of the company's first-quarter financial performance which saw net profit doubling to 7.42 billion baht (S$0.32 billion) on higher revenue, along with the absence of non-recurring expenses. The company also saw revenue rise 60 per cent to 72.6 billion baht mainly due to an increase in sales in the spirits business of 29 per cent and beer business of 129 per cent.

Share of profit of investment in associates and joint ventures, net of income tax, also soared to 1.72 billion baht from 828.1 million baht.

DBS Equity Research analyst Andy Sim has maintained a "buy" call with an unchanged target price of S$0.87.

He said that the latest set of first-quarter results has helped to "vindicate (its) view that the worst is behind". Thus, DBS's investment thesis remains intact, as the results have also supported its view that the downturn in ThaiBev's Thai domestic operational results seen in FY2018 was temporary.

"We believe the strong set of (first quarter) results should provide confidence and a rerating catalyst for the counter," Mr Sim said, adding that in the near term it is believed momentum will continue. Further rerating catalysts could also come from improved contribution from Sabeco, gradual deleveraging of the group, as well as regionalisation efforts to be the leading beverage player in Asean.

While share price has increased by about 25 per cent since the recent low seen in December 2018, upside catalyst could come from earnings per share (EPS) upgrades on better-than-expected operational performance, Mr Sim explained.

Robust earnings growth was driven by improvement in domestic consumer purchasing power, low-base effect compared to Q1 2018 on the back of destocking by agents, absence of one-off acquisition transaction fee of 2.45 billion baht the same period a year ago and strong associates' contribution.

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