Thai Beverage
Price target:
RHB “buy” 97 cents
Recovery party underway
RHB Group Research has kept a “buy” rating on Thai Beverage (ThaiBev) with a target price of 97 cents, following its pace of recovery was better than expected as seen with its most recently reported earnings.
In 1HFY2022 ended March, ThaiBev reported a net profit of THB16.3 billion ($653 million), which was 58%–59% of the full-year forecasts of the research team and consensus as demand recovery was stronger than expected.
“With the results announcement, we raise FY2022–FY2024 earnings by 5%–6%,” writes the RHB research team. “Moving forward, we expect the encouraging momentum to continue in view of the better containment of Covid-19 and broader reopening of regional economies.”
Thai Bev’s 1HFY2022 sales rose 9% y-o-y to THB143 billion with all operating divisions recording encouraging improvement due to the broader reopening of regional economies on the back of better containment of Covid-19.
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In particular, the group’s beer business contributed the most with 1HFY2022 revenue jumping 15% on a 5.5% increase in volume and hike in selling prices.
Meanwhile, the food division recorded a sharp sales recovery of 31% as the restaurant business benefited from the return of dinein crowds.
That said, 1HFY2022 operating profit only grew 7% to THB21.3 billion as higher raw material and distribution costs partially offset robust topline growth.
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However, the company’s spirit business was dragged down by an unfavourable product mix. This led to a 3% decline in ebitda, whereas the beer division was able to deliver a 19% leap in ebitda with margins expanding by 0.4ppts due to the volume recovery and average selling price (ASP) hike.
Additionally, the analysts expect the successful spinoff and listing of ThaiBev’s beer business to unlock value and catalyse its share price. The spinoff listing of the beer business, which was put on hold, is now back on the cards again.
“Looking forward, we foresee the positive recovery momentum to sustain into 2HFY2022,” says the research team. “This is taking into account further normalisation of economic activities whilst the gradual pick-up in tourist arrivals should also lift consumption and benefit all of ThaiBev’s business divisions.” The research team also expects prices to increase and continuous efficiency gain to mitigate some of the impact of higher raw material costs.
“On the other hand, distribution costs should remain elevated as the company may look to intensify its brand-building marketing initiatives to spur spending and strengthen market share now that most of the restrictions have been lifted,” writes the research team.
“We continue to like ThaiBev as a proxy to capture the consumption recovery thanks to its strong brand equity and effective marketing initiatives,” they add. — Chloe Lim
Bumitama Agri
Price target:
UOB Kay Hian “buy” 93 cents
RHB “buy” 95 cents
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Analysts lift Bumitama Agri’s TPs on the back of strong 1QFY2022 results
On the back of strong 1QFY2022 ended March results, analysts at UOB Kay Hian and RHB Group Research have kept their “buy” calls and raised their target prices for Bumitama Agri (BAL) to 93 cents and 95 cents respectively.
In 1QFY2022, BAL booked over 400% y-o-y rise in earnings, mainly backed by higher contributions from palm kernel, whose prices had increased 40% q-o-q and 80% y-o-y.
BAL managed to achieve a higher average selling price (ASP) of INR13,600 per kilogram ($243 per kilogram) during the period, RHB analysts point out. They highlight that the plantation player has not seen the impact of Indonesia’s ban on its palm oil exports — which started at the end of April — as there have not been any deliveries scheduled yet in May.
“While BAL does expect prices to come off once deliveries commence, it is also able to hold off on selling significant volumes, given its capacity to store one more month of supply in its existing storage facilities,” they note.
After adjusting for higher crude palm oil (CPO) prices of RM5,300 per tonne ($1,676 per tonne) for FY2022 and RM4,300 per tonne for FY2023, the RHB analysts have raised their FY2022– FY2023 earnings by 13% and 35%.
“As our CPO price assumptions are already lower than prevailing prices, we have not imputed any significant impact from the export ban on BAL’s earnings, as we expect this to be short-lived,” the analysts wrote.
While the RHB analysts expect earnings to remain robust, UOB Kay Hian analysts Jacquelyn Yow Hui Li and Leow Huey Chuen expect BAL’s 2QFY2022 earnings growth to be muted, mainly dragged down by lower sales volume and net CPO ASP as a result of the export ban.
As oil palm trees are in the yield-recovery phase and entering a high production cycle, the analysts expect 2QFY2022 production to be higher q-o-q and while sales volume will likely be lower.
“Based on our channel check, refiners are slowing down in receiving CPO deliveries due to the export ban. To recap, Indonesia is a net palm oil exporter with the domestic market only taking up about 1/3 of annual production. There is also a risk of seeing lower realised CPO ASP for 2QFY2022 versus 1QFY2022 if the ban prolongs into June,” the UOB Kay Hian analysts add.— Khairani Afifi Noordin
UMS Holdings
Price target:
CGS-CIMB “add” $1.63
Strong order book
CGS-CIMB Research is keeping its “add” call on UMS as the company’s net profit for the 1QFY2022 ended March stood in line with the brokerage’s expectations.
UMS’s revenue for the quarter stood above CGS-CIMB analyst William Tng’s expectations.
In his report dated May 11, Tng has kept his target price unchanged at $1.63, which is based on a target P/E of 14.45x on his FY2023 earnings per share (EPS) forecast.
On the back of the company’s strong order book, Tng has raised his revenue forecasts by 9.6% to 9.7% for FY2022–FY2024.
He has also adjusted his gross material margin down to 51.4% for the same period to factor in inflationary cost pressures.
“We also use 1QFY2022 effective tax rate as a guide and revised our FY2022– FY2024 effective tax rate assumption to 18.6%,” says Tng.
“UMS has engaged a tax consultant to help resolve the tax issue (inability to meet pioneer tax incentive conditions) with the Malaysian authorities. A positive resolution would lower its effective tax rate and lead to potential tax provision writeback,” he adds.
To Tng, potential catalysts that could re-rate UMS’s share price include stronger-than-expected orders for its semiconductor business, securing new customers for its new Penang plant and faster-than-expected earnings recovery for JEP’s aviation business segment.
“Downside risks include higher raw material prices (aluminium) arising from the Russia/Ukraine conflict and failure to renew contracts with key customers,” he adds. — Felicia Tan
