1HFY22: A Toast To A Strong COVID-19 Recovery
THBEV announced 1HFY22 core PATMI of Bt16.3b, beating expectations as its postCOVID-19 recovery gets underway. 1HFY22 revenue for every segment rose as
consumption volumes grew, while the food segment benefitted from the resumption of
dining in at restaurants. Several ASP hikes in 1HFY22 mitigated the impact of rising raw
material and packaging costs on margins. THBEV is currently trading at -1SD of its fiveyear mean PE, attractive in our view. Maintain BUY with a higher target price of S$1.05.
RESULTS
• 1HFY22 core earnings above expectations… Thai Beverage (THBEV) released its
1HFY22 results whereby overall revenue (+8.9% yoy) and core PATMI (+13.3% yoy) surged
past our expectations, forming 57.2% and 56.1% of our full-year estimates respectively.
Advertising and promotion expenses continued to decline as bars and nightlife remain shut,
with SG&A expense-to-revenue ratio falling to 14.2% in 1HFY22 (-0.5ppt yoy). The group
declared a similar interim dividend of Bt0.15 per share (1HFY21: Bt0.15), representing a
1HFY22 earnings payout ratio of 23.1%.
• …backed by a strong quarter. The strong 1HFY22 outperformance was largely driven by a
robust 2QFY22, with strong yoy contributions from the beer, non-alcoholic beverages (NAB)
and food segments. 2QFY22 revenue (+10.7% yoy) and core PATMI (+20.0% yoy) posted
sturdy growths, backed by the full reopening of Thailand’s international borders as well as
the easing of social distancing measures. The spirits segment was the sole segment that
posted negative EBITDA growth in 1HFY22, dragged by higher raw material and packaging
costs along with an unfavourable product mix.
• Spirits: Margin compression. Although the spirits segment recorded increases in both
revenue (+2.1% yoy) and sales volume (+6.4% yoy) for 1HFY22, EBITDA (-2.6% yoy and
PATMI (-0.6% yoy) softened as rising raw material and packing costs dragged down
margins. EBITDA and net margins moderated 1.2ppt yoy and 0.4ppt yoy respectively.
1HFY22 had a product mix favouring the lower-margin white spirits as bars and nightlife
venues still remain shut. THBEV also raised the ASPs of its white spirits twice in Nov 21
and Feb 22 which resulted in customers front loading their purchases to mitigate the
impact of the price hikes, leading to higher white spirits sales volume and lower overall
margins. Looking forward, with the return of tourists arrivals, management is optimistic
that the product mix between brown and white spirits would improve. Additionally, raw
material costs are expected to soften as the crop yield for molasses in FY22 has improved
as compared with FY21, leading to lower raw material costs while supporting margins.
• Beer: Increased consumption volumes as social distancing eases. Overall, beer
sales volume was up (+5.5% yoy), largely contributed by higher volumes from Sabeco in
Vietnam. We reckon that this is due to Vietnam easing social distancing restrictions earlier
as compared with Thailand. 1HFY22 beer revenue (+14.7% yoy), EBITDA (+18.6% yoy)
and PATMI (+119.2% yoy) surged, in line with higher sales volume. Although the segment
was affected by increasing raw material and packaging costs, two ASP price hikes in
1HFY22 along with production costs efficiency helped mitigate rising costs. EBITDA and
net margins were higher by 0.4ppt yoy and 1.7ppt yoy respectively. Similar to the spirits
segment, tourists arrivals coupled with bars and nightlight venues reopening would help
boost beer consumption volumes moving forward.
• BeerCo: Back on track. The group recently announced that it has renewed plans for the
listing of its beer operations (BeerCo) on the SGX, whereby it would conduct a public
offering of up to approximately 20% of the total number of issued ordinary shares in
BeerCo and retain a majority stake in the company. THBEV is expected to use the
proceeds to pare down its debt. Conservatively, we value the beer business at roughly
US$6b, based on 13X FY22 EBITDA which is line with peers.
• Food: Back to profitability; NAB: Higher SG&A to support growth. The food segment
clawed back from a net loss position in 1HFY22 to profitability due to the resumption of
dine-in restaurants. 1HFY22 food revenue (+30.6% yoy), EBITDA (+63.8% yoy) and
PATMI (-Bt79m to +Bt163m) grew and are expected to continue as social mobility in
Thailand increases. The NAB segment also recorded solid revenue (+8.1% yoy), EBITDA
(+8.1% yoy) and PATMI (+57.7% yoy) for 1HFY22 as higher SG&A, prudent cost
management along with higher sales volumes (+7.5% yoy) boosted revenue and
profitability.
EARNINGS REVISION/RISK
• We raise our FY22-24 revenue and PATMI estimates, after accounting for higher
consumption volumes for all three segments along with higher contribution from the food
segment. We increased our FY22-24 revenue by 12.1%, 20.2% and 27.7% while increasing
PATMI estimates by 19.9%, 27.5% and 34.5% respectively.
VALUATION/RECOMMENDATION
• Maintain BUY with a higher SOTP-based target price of S$1.05 (S$0.90 previously), we
reckon THBEV remains attractively priced at -1SD to its five-year mean PE, backed by an
expected earnings recovery underpinned by favourable tailwinds.
SHARE PRICE CATALYST
• Gaining market share in the beer segment.
• M&As/potential spinoff listing.
• BeerCo listing.