Back for drinks
- THBEV’s 3QFY9/22 revenue/EBITDA rose 6.8%/9.7% respectively, ahead of expectations, led by a strong recovery in beer and food segments.
- We see continued volume recovery with reopening of Thai venues; SABECO saw brand health improvement on repackaging and successful ad campaign.
- Reiterate Add with slightly lower TP of S$0.88 (due to Baht depreciation); THBEV remains our sector top pick as we view it as a laggard recovery play.
Strong recovery in beer volumes led to 3Q outperformance
THBEV’s 3QFY9/22 revenue and EBITDA rose 6.8% and 9.7% yoy respectively. We deem the set of results ahead of expectations, with THBEV’s 9M22 EBITDA of THB39.1bn (+6.7% yoy) coming in at 80%/84% of our/Bloomberg consensus FY22F. Results were led by stronger performance of beer and food segments (benefiting from earlier phases of economic reopening), while spirits segment underperformed in 3QFY22. EBITDA margins were also well managed, expanding 0.5% pts yoy to 19.0% in 3QFY22.
Economic reopening to support further volume recovery
We expect THBEV to enjoy further volume recovery in coming quarters, benefiting from further reopening of the Thai economy and recovery in tourism. Entertainment venues in Thailand reopened on 1 Jun 2022, which should support recovery of alcohol consumption (especially brown spirits). In Vietnam, SABECO’s management also shared that with its latest product repackaging and advertising campaigns, brand health has improved significantly, which we believe should bode well for further market share gains and volume growth. SABECO has also launched a few new products to better penetrate the mass premium segment.
BeerCo spin-off deferred again, but we view this as a non-event
In view of the prolonged challenging market conditions, THBEV decided to again defer the spin-off of its BeerCo subsidiary. We view this as a non-event, as newsflows have emerged since Jul that the spin-off is likely to be pushed back, subject to an improvement in market conditions. While the original intention for the spin-off was to help THBEV with further deleveraging, we deem THBEV’s current net gearing of 0.7x as healthy. With strong FCF generation, we forecast THBEV’s net gearing to reach 0.4x by end-FY24F.
Reiterate Add with a slightly lower TP of S$0.88
We raise our FY22-24F EPS by 5.0%-6.5% to reflect stronger beer volumes and margin assumptions. Reiterate Add as we believe THBEV can benefit from further volume growth riding on Thailand and Vietnam’s economic reopening and strong farm income. Our SOPbased TP is lowered slightly to S$0.88 due to the depreciation of the Thai baht, but THBEV remains our sector top pick as we believe it is a laggard recovery play – it trades at an undemanding valuation of 13.9x CY23F P/E (1.3 s.d. below its 10-year historical mean), below regional peers’ 24.4x. Potential re-rating catalysts include stronger volume recovery. Downside risks include higher-than-expected input costs pressuring margins.
