PhillipCapital analyst Paul Chew has downgraded his recommendation on Thai Beverage (ThaiBev) to “accumulate” from “buy” previously as the group’s results for the FY2021 ended Sept 30 stood below Chew’s expectations.
The group reported earnings of 24.64 billion baht ($1 billion) for the year, while revenue stood at 240.54 billion baht.
According to Chew’s estimates, the group’s earnings and revenue for the FY2021 stood at 91% and 90% of his FY2021 forecasts respectively.
On this, Chew has lowered his earnings estimates for the FY2022 by 3%, as well as earnings per share (EPS) estimates to 4.25 cents, down by 10%.
The lower estimates came as Chew says he expects a slower recovery in consumer spending.
Furthermore, he has cut foreign exchange (forex) assumptions following the weakness in the Thai baht.
See also: OCBC, citing potential recovery, initiates coverage on Nanofilm with tentative 'hold' call
To this end, Chew has lowered his target price to 76.5 cents from 86 cents, which is based on 18 times FY2022 earnings.
“Recovery [post-lockdown] is underway but the pace may remain tepid in the near term. The lockdown is taking a toll on consumer sentiment and income,” writes Chew in a Nov 28 report.
“The impact of the re-opening of the borders and nightlife entertainment and economic recovery may be more material only in 2HFY2022,” he continues, as the reopening of nightlife entertainment venues in Thailand will occur only after January 2022.
See also: Macquarie revises Singapore earnings growth for FY2024 to 7% from 3%
“Consumer sentiment and income levels remain fragile after months of lockdown. ThaiBev has lifted the selling price of spirits to offset the higher material costs. Plans for Beerco IPO are intact,” adds Chew.
DBS Group Research analysts Woon Bing Yong and Paul Yong are more optimistic on ThaiBev’s prospects.
The analysts have kept "buy” on the counter with an unchanged target price of 92 cents, as ThaiBev’s FY2021 results are deemed to have stood “in line” with their expectations.
“ThaiBev is transforming into the region's leading beverage player and has gained market share in its key markets of Thailand and Vietnam,” write the analysts on Nov 29.
“Its valuation is attractive at 14.5 times FY2022 price-to-earnings (P/E), which is -1 standard deviation from its mean forward average,” they add.
To Woon and Yong, ThaiBev, which is currently trading at 14.6 times FY2022 P/E, around the 1 standard deviation from the mean, is “not pricing in its potential as Southeast Asia’s largest food and beverage (F&B) player”.
Other positives for the counter include its cost control and productivity initiatives starting to bear fruit, as well as its low refinancing risks and strong cashflow.
For more stories about where money flows, click here for Capital Section
To be sure, the analysts at DBS are so optimistic on the stock that they feel this may be the last chance to buy into the counter on the dip.
UOB Kay Hian analyst Llelleythan Tan has, similarly, kept “buy” on ThaiBev with the same target price of 92 cents.
“We value: the spirits business at 17 times EV/EBITDA, lower than global peers, b) the beer business at 16 times EV/EBITDA, in line with Asean peers, the NAB business at 2.5 times EV/sales, and d) the food business at 14 times EV/EBITDA, in line with local peers,” writes Tan in a Nov 29 report.
“Frasers Property and Fraser & Neave, in which ThaiBev owns 29% each, are valued based on market value,” he adds.
While the group saw a 3.2% y-o-y decline in core net profit of 27.3 billion baht, Tan says the figure came in “well within expectations”.
Like the analysts at DBS, Tan is also positive on ThaiBev’s “well-managed selling, general and administrative (SG&A) costs”.
Following the group’s FY2021 performance, Tan says he has made “insignificant changes” to his FY2022-2023 revenue and net profit forecasts on higher average selling prices (ASPs) for white spirits, delayed lifting of alcohol restrictions and a better medium term recovery outlook.
“We reckon ThaiBev remains attractively priced at below -1 standard deviation to its mean P/E, backed by an expected earnings recovery underpinned by favourable tailwinds. Also, the potential listing of the group’s beer business may unlock value for the group.”
“Management has mentioned that the group has resumed the IPO process and would release more information moving forward. Barring no unexpected delays, we opine that the expected IPO date would happen in 3Q/4QFY2022,” he says.
Shares in ThaiBev closed 1 cent lower or 1.44% down at 68.5 cents on Nov 29, with a FY2022 P/B of 2.3 times and dividend yield of 3.1%, according to PhillipCapital’s estimates.
Photo: Stock photo
