After five quarters of sub-par growth due to the mourning period since the death of the king, the analyst expects vibrant growth in beer revenues in the next three years. In addition, ThaiBev’s investment in a 54% stake in Sabeco could create synergies and drive earnings in Vietnam, he says.
“[ThaiBev’s] core spirits business is on a sound footing despite recent weakness,” Tiruchelvam says. “The spirits segment will be the mainstay of Thai Bev’s profits, at over 80% of bottom line in our forecast period.”
At the same time, Tiruchelvam notes that concerns over ThaiBev’s leverage are” misplaced”. According to the analyst, ThaiBev’s headline net gearing stands at 1.5 times, while its interest coverage ratio has dropped from 27 times in 3Q18 to just 5 times in 4Q18.
“However, ThaiBev can bolster its balance sheet by disposing of its associate stakes in Fraser and Neave (FNN) and Frasers Property (FPL), which are collectively worth US$1.6 billion,” Tiruchelvam says.
The way he sees it, there is a high probability of a restructuring of ThaiBev’s holdings to bolster its balance sheets and intensify synergies.
“At 19x FY19f PE, Thai Bev is trading at 35% discount to its Asian liquor peers. At 5% FCF yield and 4% dividend yield, it is a rarity among high-growth consumer names,” says Tiruchelvam.
As at 4.43pm, shares in ThaiBev are trading half a cent lower at 62.5 cents – some 36% off its 52-week peak of 98 cents recorded in November last year.
