Lower valuation for ThaiBev's Sabeco expected: UOB Kay Hian

Singapore

UOB Kay Hian (UOBKH) on Monday said it is reasonable to expect a lower valuation for Thai Beverage Company's beer assets, given that 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 that could raise US$2 billion, people familiar with the matter told Reuters.

The amount to be raised is lower than a December 2019 report which estimated a US$3 billion issue and a US$10 billion valuation for the assets.

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 peers' average.

Shares of ThaiBev closed at 78.5 Singapore cents on Monday, up S$0.01 or 1.3 per cent.