• FY14 PATMI grew 13%
• Plans in pipeline for NAB segment
• Upgrade to BUY

FY14 results largely in line with expectations

Thai Beverage PLC’s (ThaiBev) FY14 revenue was up 4% at THB162.0b, driven by increased sales in its spirits, beer and food business. The former two segments also achieved overall better GP margins due to a rise in average selling price (ASP), but incurred higher-than-expected SG&A expenses in 4Q14. Thus FY14 PATMI came in about 4.1% lower than consensus estimates as it rose 13% to THB21.7b. Looking ahead, management is optimistic about its beer segment’s growth while white spirits remain as a steadier revenue driver compared to brown spirits.

More collaboration ahead for non-alcoholic beverages

Non-alcoholic beverages (NAB) sales decreased 7.3% YoY to THB15.8b. In line with vision2020, further collaboration among ThaiBev, F&N, Oishi and Sermsuk are expected as they exploit synergies through tapping on the entities’ complementary distribution networks and having favourable contract terms such as the sharing of marketing expenditure. For instance, Est Cola has been able to keep its market share at levels of 12-13% as it leverages on ThaiBev’s capabilities for brand promotion. Following the recent launch of 100+ in Thailand, we understand that Oishi and 100+ are expected to launch in Malaysia this year. While high A&P expenses will persist during the initial phase of building brand visibility, we believe successful penetration of products into new markets will eventually translate into narrower NAB losses as well as positive bottomline contribution in the longer term.

Upgrade to BUY; new TP S$0.80

Upon lower gearing attained for the year at 45% (FY13: 64%), the group declared a record DPS of THB0.46, with total DPS at THB0.61 (FY13: THB0.44), giving a div yield of ~3.7%. The higher DPS is likely to continue at similar levels if gearing stabilizes or improves from the current 45%. As we roll forward our SOTP model along with a weaker SGDTHB assumption and slightly higher margins expected, our TP moves up to S$0.80 (prev: S$0.77). At current price level, there is now an upside potential of 18% (including 3.7% div yield), thus we upgrade our call to BUY.

Source: OCBC Research - 2 Mar 2015