ThaiBev shares climb 5% amid active trading

Singapore

THAI Beverage Public Co (ThaiBev) shares advanced on Monday amid heavy volume, after the beverage giant posted resilient revenue and earnings before interest, taxation, depreciation and amortisation (Ebitda) despite the Covid-19 pandemic.

The counter gained as much as 7.4 per cent to trade at 65 Singapore cents in the afternoon, before easing to finish at 63.5 cents, up S$0.03 or 5 per cent. Some 470.2 million shares changed hands, making it the most actively traded by value and volume on the bourse for the day.

More than a hundred large trades, each valued at more than S$150,000, were done throughout the day, according to Shareinvestor data. These included a dozen married deals.

ThaiBev'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, said RHB analyst Juliana Cai in a note on Monday morning. These levels were above RHB's expectations, given Thailand's alcohol sales ban from early April to early May, Ms Cai said. RHB upgraded the stock to "buy" as the share price had corrected to an "attractive" valuation of 15 times of FY21 forecast price-earnings ratio. RHB's target price (TP) was unchanged at 72 cents.

Despite Thailand's alcohol ban, sales of spirits only declined about 8 per cent for the April-June quarter, while Ebitda dipped about 3 per cent, Ms Cai noted.

Similarly, DBS Group Research on Monday wrote that the 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 the Songkran festival.

ThaiBev's operating performance supports DBS's earlier thesis that alcohol consumption should be less affected vis-à-vis other consumer discretionary spending. Market worries of the impact from Covid-19 appeared to be unfounded as alcohol consumption stayed resilient, DBS analysts Andy Sim and Alfie Yeo said.

In a business update on Friday, ThaiBev said spirits sale volumes in Thailand began to recover "significantly" in May this year when the ban was lifted and wholesalers restored their depleted inventories.

Ebitda from the spirits arm grew 4.9 per cent to 21.56 billion baht (S$946.5 million), while the non-alcoholic beverage arm raked in Ebitda of nearly 1.71 billion baht, quadruple the 425 million baht from a year ago.

These two segments lifted the group's nine-month Ebitda from normal operations, which edged up by 2.2 per cent to 32.85 billion baht.

DBS reiterated its "buy" call and TP of 90 cents, as ThaiBev's operating performance is tracking "well within expectations". The group's nine-month Ebitda is at 85 per cent of the research team's full-year forecast, similar to the previous fiscal year.

Meanwhile, the beer and food segments weighed on ThaiBev's sales revenue, which shrank 7.4 per cent for the nine months to June.

KGI Securities analyst Joel Ng on Monday pointed out that the spirits business has overtaken the beer business as the biggest revenue contributor for the nine months. This came as beer sales volume tumbled 15.5 per cent during the latest three quarters, mainly due to a decrease in Vietnamese unit Sabeco's sales. The beer business was also hit by the alcohol ban in Thailand as well as Covid-19 lockdowns in Thailand and Vietnam.

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.

RHB noted that although the beer and food businesses took a bigger hit, their contributions were not as significant as the spirits arm, which made up some 80 per cent of profit after tax and minority interests in FY19.

"We expect earnings to remain fairly resilient with the spirits segment holding up," RHB's Ms Cai said.

Likewise, KGI stayed positive on ThaiBev's long-term fundamentals and dominant market share in Thailand and Vietnam, keeping its "outperform" call but cutting the TP to 93 cents. "The listing of its beer business remains a possibility and a key re-rating catalyst," Mr Ng wrote.

CGS-CIMB, meanwhile, reiterated its "hold" call and TP of 70 cents, as it likes ThaiBev's ability to control its costs, but believes that lower associate earnings could have shrunk the group's net profit for the nine months.