SINGAPORE (Aug 11): DBS Vickers Securities is maintaining its “buy” rating on Thai Beverage (ThaiBev) with an unchanged price target of $1.07.
This follows yesterday’s news of the group’s acquisition of Kentucky Fried Chicken (KFC) stores in Thailand for some $462 million through its subsidiary, The QSR of Asia.
See: Thai Beverage to acquire KFC stores in Thailand for $462 mil
In a Thursday report, analysts Andy Sim and Alfie Yeo say the announcement came as a surprise to them, as their understanding for ThaiBev’s initiative into the food business is that it serves as a “touch point” for the group – an additional distribution and marketing channel for its non-alcoholic beverages and selected alcoholic beverages.
Given that Pepsi is the only cola of choice being served at KFC and that is highly unlikely to change, the analysts see limited opportunities for the group to introduce new products other than non-carbonated soft drinks such as those under the Oishi brand.
Despite the lack of financial details disclosed with the acquisition announcement, Yeo and Sim think ThaiBev’s operations should profit from the transaction as it would make the group one of three franchisees of KFC restaurants in Thailand.
“Based on previous media reports, it is estimated that investment for each KFC restaurant branch is between THB15m to THB30 million. While the amount paid by ThaiBev is higher, this is likely to account for operating and profitable branches, in our opinion,” comment the analysts.
“We do not expect any significant changes to our forecasts at this juncture. That said, the market may react with some uncertainty on ThaiBev’s latest move. At this stage, our investment thesis remains intact on our view that the impact of mourning period is temporary and will pass,” they add.
“In addition, the expectations of an increase in excise duties should aid 4Q17 sales as agents and distributors stock up inventories Lastly, we see ThaiBev morphing into a regional F&B player with regional expansion plans undertaken via F&N.”
Shares in ThaiBev are trading 1 cent lower at 93 cents as at 12.41pm.
