SINGAPORE (March 31): UOB KayHian is starting coverage on Thai Beverage at “buy” on attractive valuation at current levels with its FY17F PE of 20.4x being lower than its global peers.
In a Friday report, lead analyst Kingpai Koosakulnirund has arrived at an SOTP-based valuation of $1.09 for Thaibev with 73% and 15% of its value coming from the spirits and beer business respectively.
The spirits business is Thaibev’s strong cash cow, contributing the largest part of revenue and EBITDA.
“As Thaibev owns more than 90% market share of spirits consumption in Thailand, we expect its spirits sales to grow amid resilient demand as consumers could switch among a wide range of products at different price points,” says UOB.
Meanwhile, Thaibev has successfully regained its beer market share since the new version of Chang beer was launched on Aug 15, climbing to above 40% in 1Q17 from below 30% before the campaign started.
“We expect this positive trend to continue and Chang beer should be able to grow its market share further,” says the analyst.
Koosakulnirund forecasts THBEV to post a 10% revenue CAGR in FY16-19, driven by the beer business. "Overall gross margin is expected to be maintained at a healthy level of around 30%. We forecast a 9% net profit CAGR in FY16-19,” he adds.
Shares of Thaibev are trading at 94 cents.
