SINGAPORE (June 29): DBS is reiterating its “buy” call on Thai Beverage with a target price of $1.07 on expectations slowing consumption in Thailand is only a temporary blip.
“While 1H17 saw results dipping by 2% y-o-y, we believe 2H17 could turn in a better y-o-y performance on the back of tighter cost control,” says lead analyst Andy Sim in a Thursday report, adding pullbacks in the share price offer a chance to accumulate the stock.
In addition, the expectations of excise tax increase could lead to distributors and agents to stock up, thus spurring sales in 4Q17F.
On a longer-term horizon, Sim believes its ongoing transformation into a regional beverage player will aid in further re-rating of the counter. Its associate, Fraser & Neave now owns 18.74% in Vinamilk, and has stated an intention to increase this further.
“We believe an outright swap with TCC Assets for a higher stake in F&N is unlikely. Instead, we believe ThaiBev will rely on F&N as its regional expansion vehicle and increase its stake in F&N only when opportune,” says Sim.
(See also: DBS toasts Vinamilk’s new status as F&N associate)
“We revised our FY17F/18F forecasts down by 8%/7% to reflect more realistic sales forecasts. Our target price is tweaked down to $1.07 from $1.09), based on sum-of-parts valuation, derived via discounted cashflows of its core operations, and imputing higher fair values for its stakes its listed associates,” says Sim.
Shares in ThaiBev are trading at 90 cents.
