SINGAPORE (May 28): OCBC Investment Research is maintaining “hold” on Thai Beverage (ThaiBev) while lowering its fair value estimate by 2 cents to $0.86 after updating its cost of equity.
This comes post the news of the group’s associate Fraser and Neave’s (F&N) planned acquisition of Starbucks Coffee in Thailand through a partnership with Maxim’s Caterers.
In a Tuesday report, analyst Deborah Ong says she is positive on this development as the acquisition extends ThaiBev’s presence and product portfolio through its collaboration with F&N.
While she believes valuations look reasonable as at the stock’s 27 May close at 80.5 cents, she does not see them as particularly compelling as regional economic growth remains an important variable for ThaiBev’s outlook given its discretionary consumer product portfolio, in her view.
“We continue to monitor the US-China trade tensions and its ramifications for global growth closely. On the bright side for ThaiBev, we expect the positive synergies from the Sabeco acquisition to flow through to its bottom line, though this will take time,” says Ong.
Meanwhile, the analyst also notes that ThaiBev has delivered total returns of -1.6% since the group’s release of its 2Q19 results.
She attributes the initial share price softness to reduced expectations for growth in the domestic spirits segment, as well as a possible response to the strength of the stock’s rally prior to the 2Q19 results release.
“Looking ahead, aside from the coronation-related celebrations in May, we expect more muted performance from the domestic spirits segment in the coming quarters,” she adds.
As at 10:50am, shares in ThaiBev are up by 0.62% at 81 cents, or 19.4 times FY19F PER.
