• THB3.8b gain from F&N’s sale of Myanmar Brewery
• New look for Chang beer
• FV unchanged

Excluding one-off, 3Q15 results still broadly in-line

Thai Beverage PLC’s (ThaiBev) 3Q15 results were broadly in line with our expectations. Revenue was up 3.4% YoY to THB36.5b, meeting 21% of FY15F estimate, with sales driven by growth in all segments except for Food. Gross profit margin (GPM) maintained at ~29% but operating profit margin fell from 13% to 12% due to higher SG&A for the quarter. The group’s PATMI of ~THB8.0b, which made up 34% of our full-year estimate, was helped by a THB3.8b gain from F&N’s disposal of Myanmar Brewery Limited. Taking this out, estimated core PATMI of THB4.2b was still within our expectations as 3Q is typically the weakest quarter.

Higher SG&A for spirits

There were no material changes for the Spirits segment in terms of volume and ASP. Amid the difficult macro environment, brown spirits volume had a slight gain, and white spirits volume is expected to remain flattish. The increase in SG&A was due to higher staff costs as well as more marketing initiatives in the form of getting better product visibility at retail outlets.

Lower gross profit margin for Beer in nearterm

In a bid to improve market share and capture demand from the new generation, ThaiBev decided to change the look of Chang beer from amber to green bottle, and consolidated the existing variants into a single brand, Chang Classic. While sales had stopped for two weeks, the group was able to ramp up production and had sold slightly more YoY for Sep.

However, GPM was lower at 16.7%, vs. ~20% for 1H15 due to higher packaging costs. Moreover, while the new beer product’s lower alcohol content should have helped lower costs, a range of factors including the change in bottle impacted GPM. While there may not be significant improvement for GPM in the near-term, there could be gains further ahead as management has locked in better prices for their raw materials needs for next year.

Maintain BUY

Although some concerns remain for Thailand’s economy, the group’s alcoholic portfolio is quite defensive. Thus we are keeping our BUY rating, with fair value estimate of S$0.83 unchanged.

Source: OCBC Research - 13 Nov 2015