SINGAPORE (July 25): DBS is maintaining its “buy” call on Thai Beverage with a target price of $1.07 as it expects domestic consumption to pick up soon.
“Pullbacks in share price post a chance to accumulate the counter, in our view,” says analyst Andy Sim in a Tuesday report.
ThaiBev saw a 2% decline in 1H17 net profit from a year ago.
However, the analyst believes that this could turn around in 2H17 on the back of tighter cost control.
The expectations of excise tax increase could also mean that distributors and agents will be stocking up, hence spurring sales in 4Q17.
“On a longer-term horizon, we believe its ongoing transformation into a regional beverage player will help to further re-rate the counter,” says Sim.
ThaiBev’s associate, Fraser & Neave (FNN) recently acquired an 18.74% in Vinamilk and has expressed its intentions to increase its stake.
When the opportunity arises, Sim expects ThaiBev to increase its stake in FNN but may look to partially divest or monetise its stakes in Frasers Centrepoint Ltd (FCL).
Potential catalysts to the rating includes margin expansion from excise tax increase, market share gains in beer, faster turnaround in non-alcoholic beverages and partial divestment of FCL stake.
On the other hand, risks include large quantum in excise tax hikes.
As at 11.04am, shares of ThaiBev are trading at 93 cents.
