Thai Beverage (ThaiBev) was the most heavily traded counter on Nov 22 with some 31.36 million shares changed hands as at 11.31am.
This is after ThaiBev announced its FY2024 ended Sept 30 results on Nov 21. The group reported full-year earnings of THB27.22 billion ($1.06 billion), 0.8% lower y-o-y. Revenue, however, rose by 2.2% y-o-y to THB340.29 billion. The group restated their results for the FY2023 following the completion of the share swap.
ThaiBev’s indirect wholly-owned subsidiary, InterBev (Singapore) Limited, completed a share swap transaction with TCC Assets. Under the swap, InterBev (Singapore) – or IBIL – will transfer its shares in Frasers Property TQ5 Limited (FPL) to TCC Assets and TCC, in turn, will transfer shares in Fraser and Neave (F&N) to IBIL. The transaction brought IBIL’s stake in F&N to 69.61% from 28.31% previously, while IBIL has fully divested its stake in FPL.
Analysts from DBS Group Research and UOB Kay Hian have kept their “buy” calls and respective target prices of 77 cents and 56 cents respectively as ThaiBev’s earnings came roughly in line with their expectations. DBS analysts Chee Zheng Feng and Andy Sim increased their target price estimate on Nov 12 from 69 cents previously.
Spirits segment
“Management’s margin expansion outlook was largely consistent with our expectations, as prices of key raw materials like barley and sugar have normalised over the last few months,” Chee and Sim write in their Nov 22 report.
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“The strong performance in Thailand Beer, optimism in Vietnam and early signs of recovery in brown spirit volumes further strengthen our confidence in projecting earnings growth of 13% [and] 9% for FY2025 [and] FY2026,” they add.
UOB Kay Hian analysts Llelleythan Tan and Heidi Mo also note that ThaiBev may see better margins in 1QFY2025 as they expect sales volumes for both white and brown spirits to improve amid an improving domestic economic outlook and more tourists in the country.
“We understand that brown spirit volumes in October 2024 and November 2024 have improved y-o-y and are set to post single-digit % growth for 1QFY2025,” say Tan and Mo in their Nov 22 report.
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“Furthermore, management noted that raw material costs for the upcoming molasses crop are around 10% - 20% lower than the current crop,” they add. “Given that the molasses crop is usually harvested in December, we expect these lower raw material costs to come through starting 2QFY2025/3QFY2025, leading to overall better margins for FY2025.”
DBS’s Chee and Sim also notes that volumes for brown spirits, which have declined y-o-y from a high base effect last year, have seen a pick up in recent months with low-single digit growth. Management has stated that it is upbeat that it will see a better performance in FY2025.
Spirits margin is also likely to improve, the DBS analysts add.
Beer segment
ThaiBev’s beer segment posted a “stable performance” with revenue up by 2.4% y-o-y and ebitda up by 6.6% y-o-y.
“Despite stiff competition across key markets, 4QFY2024 beer sales volumes surged 8.2% y-o-y, driven by improving tourist arrivals coupled with better economic activity in both Thailand and Vietnam,” say UOB Kay Hian’s Tan and Mo. “This led to higher 4QFY2024 segmental revenue (+8.0% y-o-y). However, 4QFY2024 ebitda (-3.6% y-o-y) was lower than expected, which we reckon was dragged by higher raw material costs in Vietnam.”
ThaiBev’s management is also expecting to see an expansion in margins from 2QFY2025.
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“Based on Sabeco’s latest earnings call, management sounded more optimistic on the overall Vietnam market compared to previous quarters, likely on the back of market stabilisation. In addition, management expects its higher priced raw material inventory to be depleted by January 2025. Accordingly, we believe Vietnam Beer could see decent gross margin expansion in 2QFY2025,” say DBS’s Sim and Chee.
Tan and Mo see earnings for the beer segment to continue to grow in 1QFY2025 following ongoing cost efficiencies and higher sales volumes from improving market conditions.
“We understand that the group maintained its number one market share in Vietnam while increasing its domestic market share in Thailand. Management also noted that raw material costs are expected to fall in 1HFY2025,” they write.
“Despite stiff competition, the group expects SG&A (or selling, general and administrative expenses) spending to stay muted given better efficient spending,” they add. “With better capital market conditions coupled with expected additional interest rate cuts, the group is currently evaluating options for the BeerCo IPO (initial public offering).”
BeerCo IPO
During its results call, ThaiBev said that it is continuing to have discussions with its partners and is still exploring an IPO of BeerCo. It added that it does not have a concrete timeline yet, noting, however, that current market conditions have turned favourable with the falling interest rates.
“Coupled with the recovery in its Vietnam beer business, we believe the likelihood of BeerCo IPO is much higher than before,” say Chee and Sim.
Non-alcoholic beverages and food
ThaiBev’s non-alcoholic beverages (NAB) and food segments, which saw growths in revenue and ebitda on a y-o-y basis, were in line with Tan and Mo’s expectations.
Management highlighted that it sees growth opportunities for F&N in Thailand and other Southeast Asian (SEA) markets by leveraging ThaiBev’s current route-to-market, note Chee and Sim. The consolidation of F&N is expected to register margin expansion and sales growth synergies including combined raw material procurement and research and development (R&D) efforts.
In a previous report dated Nov 12, DBS noted that the series of corporate actions in ThaiBev’s food and beverage (F&B) business could lead to a potential IPO of an “F&B Co” to unlock value, deleverage at the parent company level as well as improve strategic focus.
To this end, Chee and Sim believe that the company is seeing multiple positive signs for FY2025.
“With improved fundamentals in place, we are hopeful of potential value-unlocking corporate actions being finalised in the coming year,” they say.
Meanwhile, Tan and Mo have reduced their patmi estimates for FY2025 to FY2026 by 3% to 5% from lower margin assumptions.
The UOB Kay Hian analysts’ new FY2025 to FY2027 patmi estimates are THB29.25 billion (from THB30.17 billion), THB31.56 billion (from THB33.16 billion) and THB33.44 billion (newly introduced) respectively.
“In our view, we still reckon that ThaiBev remains attractively priced at -1.5 standard deviations (s.d.) to its long-term average mean P/E, backed by a decent 5.1% FY2025 dividend yield,” they write. “However, we recommend investors to take profit on any run-up in share price performance close to our target price. The potential BeerCo IPO remains a strong catalyst for the stock.”
DBS’s target price is pegged to 16 times its FY2025 P/E or -0.5 s.d. of its 10-year average.
As at 11.31am, shares in ThaiBev are trading 1 cent higher or 1.94% up at 52.5 cents.
