Thai Beverages’ (ThaiBev) conditional share swap agreement with TCC Asset is logical as it allows the company to become a pure foods and beverages (F&B) company and in theory could reduce a conglomerate discount, analysts at Kiatnakin Phatra Securities say.
On July 18, ThaiBev proposed a share swap of all of its 28.78% shareholding in Frasers Property TQ5 (FPL) to TCC Assets, while the latter would transfer its 41.3% shareholding in Frasers and Neave (F&N) to ThaiBev.
Upon completion, ThaiBev will hold 69.61% of F&N compared to 28.31% previously. TCC Assets will own 86.89% of FPL.
Kiatnakin Phatra’s analysts Thitithep Nophaket and Chotipat Leksakul note that given the increased holding, ThaiBev would have to consolidate F&N rather than recognise a share profit. The company would also no longer recognise the volatile share of profit in FPL given the nature of the property business, which they think is positive for ThaiBev.
The analysts are keeping “buy” on ThaiBev with a price objective of 81 cents.
JP Morgan analyst Kae Pornpunnarath is positive on the transaction; given its EPS accretion with limited additional financial burden or cash outlay; lower earnings volatility; and further streamlining of the corporate structure.
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“This corporate action could act as a catalyst to stock price, in our view,” he adds. JP Morgan has an “overweight” call on ThaiBev with a target price of 64 cents.
HSBC Global Research analyst is reiterating “buy” on ThaiBev with a target price of 59 cents. They point out that the company is taking steps to address the demographic issue in its core Thailand spirits business, which should help the sustainability of growth while its core spirits business remains cash flow-generating.
“Key potential catalysts include a beer volume recovery in Thailand and Vietnam and new beer launches gaining traction among consumers. The key downside risk would be a failure to defend market share in Vietnam beer and Carabao gaining market share in Thai beer at a rate that is faster than our original expectations,” analysts Selviana Aripin, Joy Wang and Shuo Han Tan note.
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As at 4.08pm, shares in ThaiBev are trading 0.5 cents higher or 1% up at 50.5 cents.
