Thai Beverage

UOBKayhian on 12 Oct 2012

What’s New

—  Growing footprint in ASEAN. We had a conference call with the management of Thai Beverage Plc (TB). This note highlights the key takeaways from our call.



Stock Impact

·      Underpinned by resilient spirits contribution.The spirits segment remains its core earnings driver, accounting for 56% of 1H12 group sales and 92% of net profit. Sales volume growth has been steady since 2008, with the latest 1H12 results showing a volume growth of 10.1% yoy. TB is the market leader in Thailand’s spirits market, with an estimated market share of over 80%.

·      Strategic acquisition of Serm Suk. In Sep 11, TB acquired Serm Suk. We view the acquisition as strategic given Serm Suk’s strong non-alcohol product portfolio and logistics infrastructure. This is complementary as TB sees stronger growth prospects for non-alcohol beverages. In addition, Serm Suk will also provide TB with an efficient returnable bottle system. 

·      More than just alcohol beverages. We believe TB is an emerging regional consumer company rather than just an alcohol company. This is through several strategic investments including Wrangyer, Oishi and most recently an investment in Singapore. All these moves will position TB with a strong Southeast Asian presence, in our view.

·      Key growth strategies. Management has identified several strategies to drive growth including: a) maintaining market leadership & brand investment, b) expand new profitable segments, c) premium product offering, d) developing international business, and e) leveraging on its infrastructure and distribution network.

·      Dividend policy. The group has a dividend policy of distributing not less than 50% of net profit after the deduction of all specified reserves. In 2011 and 2010, TB’s payout was 77% and 83% respectively.     



Valuation

·      Undemanding consensus valuation. Based on consensus estimates, TB is trading at FY13F PE of 14.8x against a projected EPS growth of 12.7% yoy. This appears undemanding when compared to regional F&B consumer companies’ 21.7x and 11.9% yoy respectively.