Hot stock: ThaiBev up 5.8% on resilient spirits business; RHB upgrades it to 'buy'
SHARES of Thai Beverage Public Company (ThaiBev) advanced on Monday amid heavy volume, after the beverage giant posted resilient revenue and earnings before interest, taxation, depreciation and amortisation (Ebitda) despite the coronavirus pandemic.
The counter rose 5.8 per cent or 3.5 Singapore cents to 64 cents as at 11.17am, with 120.6 million shares traded. It was the most active by both value and volume on the Singapore bourse.
RHB upgraded the stock to "buy" from "neutral" as the share price has corrected to an "attractive" valuation of 15 times of FY21 forecast price-earnings ratio, analyst Juliana Cai wrote on Monday morning. She kept the target price (TP) unchanged at 72 cents.
ThaiBev's implied Q3 revenue and Ebitda were above RHB's expectations, given the alcohol ban in Thailand during the Songkran period, Ms Cai said.
The food and beverage player's business update for its nine months ended June, 2020 implied that its Q3 revenue declined about 15 per cent year on year while Q3 Ebitda fell 7 per cent.
Despite Thailand's alcohol ban from early April to early May, sales of spirits only declined about 8 per cent for the April-June quarter, while Ebitda dipped about 3 per cent, Ms Cai noted.
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Similarly, DBS analysts Andy Sim and Alfie Yeo noted that ThaiBev's Q3 revenue drop arising from the alcohol ban was "not as dire as expected", considering April was supposed to be a peak month for alcohol sales as it coincided with Thailand's Songkran festival.
ThaiBev's operating performance for the nine months supports the DBS analysts' earlier thesis that alcohol consumption should be less affected vis-à-vis other consumer discretionary spending. Market worries of the impact from Covid-19 appear to be unfounded as alcohol consumption stayed resilient, they added.
DBS Group Research on Monday reiterated its "buy" call and TP of 90 cents, as ThaiBev's operating performance is tracking "well within expectations". The group's Ebitda for the nine months to June is at 85 per cent of the research team's full-year forecast, similar to the previous fiscal year.
In its business update on Friday evening, ThaiBev reported that the group's sales revenue shrank 7.4 per cent year on year to 190.1 billion baht (S$8.36 billion) for the nine months ended June 30, 2020, weighed down by lower revenue from the beer and food segments.
Spirits sale volumes in Thailand began to recover "significantly" in May this year when the temporary ban on alcoholic beverage sales was lifted and wholesalers restored their depleted inventories, ThaiBev said.
The group's beer business was also hit by the alcohol ban in Thailand as well as Covid-19 related lockdowns in Thailand and Vietnam, with the segment's sales slumping 14.2 per cent on the year to 79.32 billion baht.
ThaiBev's nine-month Ebitda from normal operations rose by a marginal 2.2 per cent on the year to 32.85 billion baht from 32.13 billion baht previously, boosted by the spirits and non-alcoholic beverage segments.
Its spirits arm saw Ebitda grow by 4.9 per cent to 21.56 billion baht for the nine months. The non-alcoholic beverage business reported robust Ebitda of nearly 1.71 billion baht, which is quadruple the 425 million baht from a year ago.
In contrast, the beer business' Ebitda declined 9.3 per cent to 8.83 billion baht. The food segment's Ebitda almost halved to 751 million baht from 1.42 billion baht a year ago, due to Thailand's prohibition on dining out from April to mid-May.
Although the beer and food segments took a bigger hit from the alcohol ban and Covid-19 related movement restrictions, RHB noted that their contributions were not as significant as the spirits arm, which accounted for some 80 per cent of ThaiBev's FY19 profit after tax and minority interests.
"We expect earnings to remain fairly resilient with the spirits segment holding up," RHB's Ms Cai said on Monday.
Meanwhile, CGS-CIMB reiterated its "hold" call and TP of 70 cents on the stock, saying it likes Thaibev's ability to control its costs.
However, it believes that lower associate earnings could have led to the group's net profit shrinking for the nine months, in line with the brokerage's expectations, CGS-CIMB analyst Cezzane See wrote in a note on Saturday night.
Ebitda from ThaiBev's Singapore-listed associates Fraser & Neave (F&N) and Frasers Property sank 44 per cent year on year for the nine months ended June, 2020.
Including the performance of F&N and Frasers Property, the ThaiBev group's Ebitda edged down by 3 per cent year on year to 35.16 billion baht for the period.
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