vested
Thai Beverage Public Company (THBEV SP): BUYMarket Cap: US$14,163m
Average Daily Value: US$11.00m
Price Target: S$1.04 (Upside 32.1%) (Prev S$1.04)
Alcohol guards against virus infection1Q20 attributable net profit up 14% y-o-y despite high base last year, exceeding expectations
Robust domestic Spirits volume, NAB profitability helped drive performance Covid-19 worries unlikely to have major impact
Results reflect resilient performance, YTD share price retreat unwarranted, maintain BUY
Maintain BUY with TP at S$ 1.04. ThaiBev’s share price is down YTD, possibly on concerns of flagging growth in the Thai economy and the impact of drink driving laws in Vietnam.
With a strong start and robust 1Q20 results, we believe this should allay concerns. We maintain our BUY recommendation and TP of S$ 1.04, and retain our positive stance on the counter.
1Q20 net profit up 14% y-o-y; ahead of expectations. ThaiBev reported a strong 1Q20, with core attributable net profit growth of 14% y-o-y to Bt8.4bn, while revenue was up 4% to Bt 75.7bn. This came ahead of our expectations, and the pleasant surprise came largely from a strong Thai domestic spirits and beer volume growth, registering 7% and 13.5%, respectively.
Valuation is reasonable at
17.1x FY20F PE, which is below its historical 5-year forward average PE of 22x.
Where we differ? High gearing mitigated by strong OCF. The market could be skeptical of its high gearing. We believe this should not be an issue as management has termed out its borrowings and able to repay/ refinance its obligations with its strong cashflow. We opine that deleveraging remains among the key priorities of management.
Potential catalysts. Stronger volume picks up in Thailand, better performance from Saigon Beer Alcohol Beverage Joint Stock Company (Sabeco), faster turnaround in non-alcoholic beverages, and deleveraging through monetisation of assets.
Valuation:
Our TP remains at S$ 1.04, implying 32% upside from current price of S$ 0.79. Our TP is based on sum-of-parts valuation, derived via discounted cashflows of its core operations, and fair values for stakes in listed associates.
Key Risks to Our View:
Expectations of continued upturn in demand misplaced. Our thesis is premised on continued demand recovery on the back of an uptick in farm income, support in consumption from government stimulus; and if this is not sustained or misplaced, it could present downside risks.
Source: DBS
https://researchwise.dbsvresearch.com/R ... bfdhkfdhjg
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