CGS-CIMB Research analyst Ong Khang Chuen has kept “add” on Thai Beverage (ThaiBev) as he sees a recovery in consumption in sight due to the easing lockdown measures in Thailand and Vietnam.
Both countries have previously announced that they plan to reopen their economies in September in a bid to try to adapt to and live with Covid-19.
“As daily new cases in both countries show a downward trajectory, this could allow for further easing of restrictions and support consumption recovery, in our view,” writes Ong in a report dated Sept 21.
According to him, industry data has showed resilient volumes in Thailand in July, while volumes in Vietnam have slowed down.
Domestic liquor and beer consumption returned to pre-Covid-19 levels in July, though sales volumes were weaker on a y-o-y basis, says Thailand’s Office of Industrial Economics.
“We maintain our view that ThaiBev should be relatively resilient vs. peers, given its strong presence in off-trade channels, and it being a potential beneficiary of down-trading, with its positioning as a mass player for beers in Thailand and Vietnam,” says Ong.
On this, Ong has kept his target price of 84 cents, which imply 19 times CY2022 price-to-earnings (P/E) with 0.5 standard deviation (s.d.) above the counter’s 10-year historical mean.
“We believe ThaiBev’s risk-reward profile is improving with easing lockdown measures in Thailand and Vietnam, which could aid consumption recovery in 1QFY2022,” he says
“ThaiBev trades at an undemanding valuation of 14.6 times CY2022F P/E (1.1 s.d. below its 10-year historical mean), below regional peers’ 27.8 times. We believe the current valuation has more than priced in near-term headwinds,” he adds.
Looking ahead, Ong has forecast ThaiBev to achieve an EBITDA margin expansion to 18.7% for FY2021, as it adopts prudent cost controls to tide through the near-term headwinds.
“We believe ThaiBev has been spending less on advertising given the lower social mobility and has instead focused on improving its distribution channels to drive sales,” says Ong, who has forecasted a 6.6% core net profit growth in 2HFY2021 for the group.
Shares in ThaiBev closed 1 cent higher or 1.55% up at 65.5 cents on Sept 23, or an FY2021 P/B of 2.57 times with a dividend yield of 3.26%.
