• Slower 4Q expected
• Beer market share stable
• NAB growth intact

Results met our expectations

Thai Beverage’s FY16 results met our expectations. Due to a change in financial year end from 31 Dec to 30 Sep, FY16 is comprised of 9MCY16. Thus comparing the first 9M of both years, FY16 revenue was 14.8% higher at THB139.2b and excluding one-offs last year, core net profit rose 14.3% to THB19.0b, meeting 97% and 100% of our FY16 estimates, respectively.

By segment, Spirits business largely maintained its profits at THB14.5b while Beer’s net profit was up 281% to THB2.8b on higher sales volume and lower raw material costs. Non-Alcoholic Beverages (NAB) also saw a smaller net loss. Although estimated 3Q16 operating costs was ~27% higher YoY, the decline was mainly due to earlier accrual of special bonus that would have typically been recorded in 4Q, and partially due to timing differences in marketing campaigns.

Looking ahead

Given the year-long mourning season in Thailand, management anticipates more destocking in Spirits business for one to two more months. The trend of consumers trading down to white spirits may also continue. In addition, the excise tax may happen in 1H17. On Beer, despite efforts from its key competitor, market share was still stable at ~40%.

Growth for NAB was also intact, and we understand that its major brands (Crystal, Est, Oishi) had increased its market share over the past 9M. Generally, advertising activities planned for 4Q would be postponed, nevertheless, they hope that conditions would normalize further into 2017.

Consider accumulating at current price levels

OCBC Treasury Research believes there is little downside risk in economic fundamentals for Thailand, aside from the tourism sector during the mourning season. There was no change to guidance on corporate restructuring, which is expected to happen next year. As we still like the group’s long term growth story, at current price levels, we upgrade from hold to BUY, with an unchanged fair value estimate of S$1.01. Separately, the group has announced a final dividend of THB0.40/share, bringing total DPS to THB0.60 (vs. THB0.61 last year), representing a payout of 80%.

Source: OCBC Research - 22 Nov 2016