$THAI BEVERAGE PUBLIC CO LTD(Y92.SI)$ 

ThaiBev: New reasons to cheer one of Asean's 'MVP' F&B stocks

In January 2020, Thai Beverage (ThaiBev) was included in one of The Edge Singapore’s annual top 10 locally-listed stocks to watch. At that time, ThaiBev was exploring a potential US$10 billion ($13.7 billion) listing of its brewery business. However, the potential spin-off was said to be “off” and then “on” again. This happened a couple of times with the latest news last August saying the listing is on hold for now.

Now that Covid-19 restrictions are being lifted in Thailand and around the world, there are new reasons to continue cheering for ThaiBev.

During Covid-19, ThaiBev’s business took a hit. Earnings in FY2020 ended Sept 31, 2020, dipped 2% y-o-y to THB22.75 billion ($1 billion). Revenue fell by 5.2% y-o-y to THB253.48 billion because of lower alcohol sales. The following FY2021, ThaiBev’s earnings improved 8% y-o-y to THB24.64 billion even though revenue fell further by 5.1% y-o-y to THB240.54 billion due to Covid-19 restrictions.

However, as Covid-19 restrictions were gradually relaxed, ThaiBev’s earnings for FY2022 improved, with earnings up by 22% y-o-y to THB30.1 billion. Revenue also grew 13% y-o-y to THB272.4 billion on the back of higher sales of ThaiBev’s beer, non-alcoholic beverages, food and spirits.

As at Jan 13, ThaiBev’s shares are trading at 70.5 cents, which is over 30% higher than its Covid-19 lows back in March 2020.

The latest reports show analysts are all positive about ThaiBev. Andy Sim of DBS Group Research on Nov 17, 2022, said “one of the most valuable large-cap Asean F&B counters” is set for recovery not just from the return of tourists to Thailand but from “robust GDP growth” in markets across the region.

In a subsequent report on Nov 25, 2002, Sim said sales of beer, food and non-alcoholic beverages in neighbouring Vietnam were lifted by the easing of restrictions. Sim adds that the year-end festivities should continue to drive alcohol consumption.

Analysts from CGS-CIMB Research and PhillipCapital also see FY2023 as a year of growth for ThaiBev due to the reopening of borders and entertainment outlets. The higher selling prices as well as a spur in demand on the back of the World Cup and upcoming Thai elections are also positive factors.

“Management has started to observe a consumer sentiment recovery,” say CGSCIMB analysts Ong Khang Chuen and Kenneth Tan. “ThaiBev has started to increase selling, general and administrative (SG&A) expenses spend in anticipation of stronger on-trade sales in 1HFY2023 but will focus on efficient spend to ensure that it remains lower on a per-unit litre basis when compared to pre-Covid levels,” they add.

PhillipCapital’s Paul Chew says ThaiBev is likely to see gross margins improve as commodity prices come down. However, “higher marketing spend will dampen margin improvements,” he warns.

RHB Group Research says China’s reopening is expected to bode well for the group, especially due to its “significant contribution of tourism to the economies of Thailand and Vietnam”.

“While spirit consumption has remained stable throughout the pandemic due to robust domestic demand, beer consumption growth has been relatively modest due to weak tourism activity in both Thailand and Vietnam,” RHB adds. The pick-up in volume from Chinese tourists is “likely to be gradual, as governments would also want to manage and prevent any sharp rise in Covid-19 infection”.