SINGAPORE (Jan 17): Late last year, Thai Beverage (ThaiBev) confirmed news reports that it was exploring a potential listing of its brewery business, albeit at the “early stages”. Subsequently and separately, the company denied news reports that claimed it was seeking a buyer for its business in Vietnam. The company clarified that such claims are “false and without merit”. “[ThaiBev] will make further announcement(s) as appropriate should there be any material developments which warrant disclosure, in accordance with relevant Thai and Singapore regulations,” it said in a Dec 18 filing.
Still, assuming that ThaiBev decides to proceed with the listing, the company is set to benefit. “As a holding company (ThaiBev), they will get better value for their subsidiary [listed brewery business],” Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer, told The Edge Singapore in Issue 911 (week of Dec 9, 2019) last year. “The spin-off would be a positive note.” He added that the listing could include moving some of ThaiBev’s debt off its balance sheet.
UOB Kay Hian analyst Lucas Teng estimated that the listed brewery business could be valued at an enterprise value (EV) of 23 times its ebitda. This was assuming that ThaiBev is aiming for a US$10 billion valuation and that it accounts for the segment’s interest-bearing liabilities and minority interest. “This is higher than peers’ average of 15 times. We estimate that Sabeco is currently trading at approximately 20 times EV/Ebitda,” he wrote in a Dec 3 note.
In response to recent queries by The Edge Singapore, ThaiBev has maintained its previous stance. The company says it will issue an appropriate announcement if and when there is a firm decision to proceed with any strategic proposals and opportunities.
On Jan 15, Thai Bev shares closed at 88 cents, down 1.7% since the start of 2019. At this level, Thai Bev shares are valued at 21.3 times historical earnings.
Meanwhile, ThaiBev posted impressive results in FY2019 ended Sept 30. The company reported revenue of THB267.36 billion, up 16.4% y-o-y but earnings increased by a faster pace of 29.7% y-o-y to THB23.27 billion on the back of mostly improved performances from all its businesses.
The company’s beer business generated 26.6% y-o-y increase in revenue to THB119.6 billion. Total sales volume of beer – including that of 53.58%-owned Vietnamese subsidiary Saigon Alcohol Beer and Beverages Corp's (Sabeco) – was 2.7 billion litres, a y-o-y increase of 31%. However, earnings declined 36% y-o-y to THB826 million, due to higher financing costs. Its spirits business, on the other hand, recorded earnings of THB19.16 billion, up 12.9% y-o-y, on the back of a 8.6% y-o-y growth in revenue to THB115.04 billion.
Looking ahead, ThaiBev’s beer business could also receive a boost after it tightened its control of Lamdong Beer, an associated company of Sabeco. On Dec 25, 2019, the company announced that Sabeco completed an acquisition of a VND100 billion ($5.8 million) stake in Lamdong Beer. As a result, Sabeco’s direct interest in Lamdong Beer was increased to 52.9% from about 20% previously. ThaiBev says Lamdong Beer will use the funds for expansion and operational purposes.
