Red Bull's Thai rivals outperform most global beverage stocks

[BANGKOK] Red Bull's two Thai major rivals have outperformed most global beverage stocks as they extend their domestic success against the world's biggest energy drink maker to overseas markets.

Shares of Osotspa, the nation's biggest energy drink maker by market share, have delivered a total return of 45 per cent in the past six months, the second most among about 100 global beverage makers with market value of at least US$1 billion, according to data compiled by Bloomberg. Carabao Group, Thailand's No. 2, has generated a 39 per cent total return, the fifth best.

"A recovery in domestic sales and aggressive expansion in neighboring countries has really bolstered their earnings and outlook," said Theethanat Jindarat, an analyst at Yuanta Securities (Thailand) Co. in Bangkok. "Still, their stocks may be exposed to a possible correction in the short term as valuations are probably too stretched on overly excessive earnings optimism."

Thailand arguably sparked the modern day energy-drink industry, with the Red Bull brand created by the late Thai tycoon Chaleo Yoovidhya and Austrian billionaire Dietrich Mateschitz. The drinks are popular among labourers, who can often be seen downing multiple bottles as ballast against the Southeast Asian nation's sweltering daytime heat.

Shares of Osotspa and Carabao have rallied as rising local and international sales of their energy drinks boosted earnings. The two companies held about 80 per cent of energy drink sales in Thailand in 2018. That compared with a 17 per cent share for Red Bull's local version, produced by the Yoovidhya family's T.C. Pharmaceutical Industries Co., according to Euromonitor International's latest data. Red Bull originated in Thailand before becoming the global icon for energy drinks.

Shares of Osotspa and Carabao traded at more than 33 times their 12-month earnings estimates, according to data compiled by Bloomberg. That compared with a multiple average of about 19 times for Thai food and beverage companies, whose sectoral index has gained 2.5 per cent in the past six months. Ostotspa's relative strength index is also higher than a threshold of 70 that indicates to some investors that the shares may be overbought, while Carabao is close to that level.

Osotspa was established in 1891 by the Osathanugrah family as a small pharmacy store in downtown Bangkok. It now sells energy drinks under its M-150 brand domestically and as Shark in international markets. The company is building a new beverage factory in Myanmar, according to its website. Net income in the first half of 2019 climbed 11 per cent from a year earlier to 1.59 billion baht (US$53 million).

Billionaire Sathien Setthasit founded Bangkok-based Carabao, whose name stems from the Filipino word for buffalo, with Yuenyong Opakul, lead singer of a popular Thai rock band that inspired the company's name. Sathien has a net worth of US$1 billion, according to the Bloomberg Billionaires Index.

Carabao has expanded its sales in the U.K. and China, betting its success in Thailand and other Asian countries over Red Bull would help it compete internationally. Net income in the January-June period climbed 149 per cent to 971 million baht.

Representatives of Osotspa and Carabao declined to comment on the companies' share prices.

BLOOMBERG