A return to form is still underway for both Thai Beverage (ThaiBev) and a pandemic-weary world. While a gradual recovery predicted is still some time away, the consumer non-cyclical sector ThaiBev inhabits is relatively resilient.
ThaiBev and its subsidiaries produce and distribute alcoholic and non-alcoholic beverages in Thailand and internationally. The company operates through four segments: spirits, beer, non-alcoholic beverages and food.
Last April, ThaiBev, one of the 30 component stocks of the Straits Times Index, pulled the plug on a proposed spin-off and listing of its beer business on the local exchange “in view of the current uncertain market conditions and volatile outlook, aggravated by the worsening Covid-19 pandemic in Thailand and other countries”.
The idea first surfaced in 2019. The brewer of Chang Beer created BeerCo in 2020 to streamline and consolidate the company’s brewery business and operations. The initial plan — now put on hold — involved selling a 20% stake in BeerCo through an IPO.
Last September, ThaiBev president and CEO Thapana Sirivadhanabhakdi said the BeerCo IPO “will certainly happen” as the company still considers it the most viable way to raise funds. “BeerCo’s IPO depends on timing and readiness of investors,” says Thapana. “It is because I have to protect ThaiBev shareholders’ value in their best interest.”
In addition, ThaiBev will spend more than THB 400 million ($16.27 million) to expand its food business in Thailand. Nongnuch Buranasetkul, the company’s senior vice-president, announced in January plans to open 40 restaurants this year, up from 24 eateries opened last year.
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While ThaiBev has grand plans on the horizon, analysts are more measured in their present-day outlook. UOB Kay Hian Research removed ThaiBev from its “Alpha picks” portfolio on Jan 3 due to Thailand’s current Omicron situation and the government’s movement control measures.
That said, the team says it remains bullish on the counter’s post-Covid-19 recovery prospects. “[We] will relook [at the counter] when the Omicron situation improves,” it writes.
Other analysts were turned off by ThaiBev’s FY2021 ended December 2021 results, which saw net profit after minority interests and tax inch up 8.3% y-o-y to THB 24.6 billion.
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PhillipCapital analyst Paul Chew downgraded his recommendation on ThaiBev to “accumulate” from “buy” on Nov 28 as earnings stood at 91% of his FY2021 forecasts. Chew lowered his target price to 76.5 cents from 86 cents based on 18 times FY2022 earnings.
“Recovery is underway but the pace may remain tepid in the near term. The lockdown is taking a toll on consumer sentiment and income,” writes Chew. “The impact of the re-opening of the borders and nightlife entertainment and economic recovery may be more material only in 2HFY2022.”
On the flipside, DBS Group Research analysts Woon Bing Yong and Paul Yong have kept a “buy” on the counter on Nov 29 with an unchanged target price of 92 cents.
Unlike Chew’s forecasts, ThaiBev’s FY2021 results stood “in line” with their expectations. Woon and Yong also pointed to its potential as Southeast Asia’s largest F&B player with cost control and productivity initiatives starting to bear fruit, its low refinancing risks and strong cash flow.
Likewise, RHB Group Research analysts have maintained “buy” on ThaiBev on Nov 29, with a target price of 97 cents and 14% earnings growth for FY2022. They are cheered by the Thai government’s stimulus measures to boost purchasing power and reopen the country’s borders to domestic as well as foreign tourism.
“We believe ThaiBev is well placed to capitalise on the recovery in consumption post-economic reopening, thanks to its strong brand equity and entrenched market position in the Thailand and Vietnam markets,” notes RHB.
