Lately, the price of Thai Beverage has been sliding as a result of the emergence of the delta variant and increased covid infections in the country. People in Bangkok has been placed under fresh curfews and restrictions after a surge in the number of infections.

Daily reported trends in Thailand

Vaccination has been slow in the country as well with latest figures showing only 3.65m of the population has been fully vaccinated. This is only about 5.2% of the entire population.

The recent opening of Phuket island to foreign travellers has its own hiccups after a passenger was tested positive on arrival in Phuket on July 16. Another 13 people on the same flight from the UAE were sent into hotel quarantine at a cost of just under US$1,600 per pax, though all of them tested negative for the covid virus.

These events have hindered Thailand’s progress to open up the country to foreign visitors as tourism is a major contributor (20%) to the kingdom’s annual GDP.

The Thai government’s plan or “roadmap” to reopening is as follows:

Stage 1. From April 1st until June 30th, vaccinated tourists will be allowed to undergo a reduced quarantine period of only 7 days. They will be also allowed out of their room at certain times to use designated areas of the hotel, if applicable. The unvaccinated tourists are required to quarantine for 10 days.

Stage 2. From July 1st until September 30th, vaccinated tourists will be allowed to visit Phuket without any quarantine period under what is called the “Phuket Sandbox” program. Visitors will be required to stay in Phuket for at least 14 days, after which they are free to travel to other parts of Thailand.

Stage 3. From October 1st until December 31st, five other destinations will allow vaccinated tourists to arrive without a quarantine requirement under the seven-day sandbox program, which requires them to stay within the prescribed area for 7 days. This will include Krabi, Phangnga, Koh Samui, Pattaya, and Chiang Mai.

Stage 4. It is speculated that from 1st January 2022, vaccinated tourists will be able to enter the country and move around freely without quarantine. However, any setbacks at any of the previous stages, which seem highly likely, could cause the date to be set back significantly.

Though there are plans, the execution might be challenging.

Tourists may risk paying a hefty amount if they are tested positive after arriving in Thailand. The ongoing vaccination program seems to be behind time and a surge in cases lately may deter visitors as well.

I don’t think anyone would be able to give a definite date as to when tourism in thailand will return back to pre-covid level. But i am sure it will definitely happen one day in the future.

In view of a possibility that the opening is delayed, or time required for the country’s tourism industry to get back to pre pandemic level, we need to ensure that Thai Beverage will have the capability to withstand this period of reduced business activities.

As a result of covid, debt is not well covered by operating cashflow (19.6%). However, the interest payments of its debt are well covered by EBIT (6.6x).

One thing to note is that the owner of ThaiBev, Mr Charoen Sirivadhanabhakdi has a networth of US$16.8 billion. He has a number of other businesses other than Thai Beverage as well. It is good to know as an investor, that the company does have a strong backing. Moreover, the company is the biggest beverage company in Asia. With this, we can most probably assume that the company is able to withstand the prolong covid condition in Thailand. With many countries looking at managing covid rather than controlling covid, the light to the end of the tunnel may be less than a year (personal assumption).

Valuation

Historical PE levels

Currently, the company’s shares are trading at a PE of 12.64x. The other time that the PE has been so low was on the 20th of March 2020 at 10.71x. The high was established on the 1st of August in 2016 at 25.17x. As such, it does look like the shares are undervalued from PE’s persperctive.

Potential share price catalysts going forward:

  1. Increased Local Vaccination rates
  2. Reopening of borders to international travellers
  3. Spinning off of BeerCo.

Risks:

  1. Increased in the number of infections, hospitalisation and death cases
  2. Government imposed restrictions in the sales of alcohol
  3. Benign response from international travellers after the country opens up its borders

Currently the shares are trading at 65 cents as of writing.

Please read disclaimer and again, the above is for informational purposes only and should not be taken as a solicitation to buy securities. Do consult your financial advisor as i do not know your investment risk profile and your investment objectives and time horizon.