SINGAPORE (May 12): DBS is maintaining its “buy” recommendation on ThaiBev with an unchanged sum-of-parts target price of $1.09.
Although 2Q17 results was a dampener and could cause share price to weaken in the immediate term, DBS is taking a longer term positive view of the counter.
“We believe the effects were largely due to the mourning period and should normalise over time, and sales of beverages should pick up again,” says analyst Andy Sim in a Friday report.
Stronger contribution could come from its associates F&N and Frasers Centrepoint (FCL) in 2H17 while further catalysts lies in corporate restructuring of its stakes in F&N and the potential monetisation of its stake in FCL which is worth $1.57 billion at current prices.
“We maintain our view that F&N will be the vehicle to pursue inorganic growth opportunities outside of Thailand and the Spirits category, and potential acquisitions could provide an opportunity for ThaiBev to further consolidate its stake in F&N,” says Sim.
However, a new excise tax that is expected to take effect from Sept could lead to bump up in sales on trade loading prior to that in 4Q17.
The new excise tax could change from ex-factory price to one based on retail price before VAT and increase a bottle of beer by around 4% to 5%.
“This could result in distributors and agents stocking up prior and cause a surge in sales volume for the group,” says Sim.
After a strong 1Q17, ThaiBev’s 2Q17 results were below expectations with net profit down by 23.4% to THB6.6 billion ($268 million). This was largely due to subdued sales arising from the King’s mourning period, coupled with higher marketing expenses postponed from 1Q17. Associates income also dipped by 52% y-o-y to THB532 million.
(See also: ThaiBev 1H earnings fall 1.8% to $580 mil)
Despite the drop in profit, the group has declared an interim DPS of THB 0.20, similar to 1H16. Note that the group changed its financial year end to Sept from Dec, and 1H16 represented the period from Jan 2016 to June 2016.
Shares of Thaibev are down 3 cents at 89 cents.
