• Good growth in core PATMI
• Beer continues growth momentum
• Higher interim dividend

1H16 PATMI up 16%

Thai Beverage PLC (ThaiBev) released its 2Q16 results yesterday evening. 2Q16 revenue was up 16.6% YoY to THB45.5b, driven by growth in sales of Spirits (+0.7%), Beer (+69.4%), NonAlcoholic Beverages (NAB) (+3.3%) and Food (+4.8%). PATMI was down 1% to THB5.8b due to lower contribution from F&N/FCL during the quarter. Nonetheless, net profit excluding F&N/FCL improved by 19.1%. 1H16 revenue was up 18.8% to THB100.6b and PATMI rose 16% to THB14.4b, which we deem to be within our expectations. Separately, the group has announced a higher interim dividend of 0.20 THB/share vs. 0.15 THB/share.

Beer maintained market share

Within the alcoholic segment, 2Q16 revenue from Spirits segment saw a 0.7% gain to THB24.3b, as sales of white spirits grew while brown spirits declined due to down-trading trends. Notably, growth momentum for Beer continued this quarter, and management believes their market share has maintained at the ~40% level. We understand that its key competitor engaged in price discounting since May, while Chang has been pricing up slightly such that price parity between their products has been reached near the end of Jun onwards. Looking ahead, while there could be further impending moves from competitors, we expect Beer’s market share and performance to sustain for the year.

NAB losses narrowed

The NAB segment continued to narrow its losses by 64.3% to THB217m in 2Q, excluding the exceptional gain on sales of Sermsuk’s land and building in 2Q15. The on-going efforts to leverage on ThaiBev’s strong distribution network to extend presence in Thailand as well as production capacity expansion plans bode well for this segment’s long term growth.

Keeping our rating for now

As we update our DCF assumptions and consider lower SG&A estimates in terms of percentage of sales, our SOTP based fair value estimate increases from S$0.89 to S$1.01. We maintain our HOLD rating on valuation grounds. On key catalysts, we have not accounted for the corporate restructuring or potential M&A in our estimates. In addition, management has indicated that the corporate restructuring, which was initially guided to happen this year, is likely to occur next year instead, citing FCL’s corporate activities as a factor.  

Source: OCBC Research - 12 Aug 2016