• Still a low season
• Stable market share
• Potential expansion in QSR space

Results Within Expectations

Thai Beverage PLC’s (ThaiBev) 3QFY17 results came in within our expectations amid a muted consumption backdrop. Revenue was largely unchanged YoY at THB45.3b, as Spirits was up 4.5% from a low base last year, but sales declined for Beer (-7.1%), Non-alcoholic Beverages (NAB) (-4.1%) and Food (-2.3%).

Including a THB8.5b fair value gain from F&N, overall PATMI was up 162% to THB15.2b. Excluding contribution from F&N and FCL, net profit was down 4.4% on a mixed segmental performance. 9MFY17 revenue was down 6% to THB142.5b and net profit excluding fair value gains was up 3% to THB21.1b, forming 76% and 80% of our FY17F estimates, which we deem to be within expectations as 4QFY17 is typically the lowest season.

Still Seeing Effects From Mourning Period

Spirits sales was up this quarter on higher volume, due to a low base of sales in 3Q16 as agents had started to delay the stock piling after a price increase. Thus Spirits net profit was up 2.4% to THB4.8b. Nonetheless, the mourning period effect still affected some business groups as on-trade consumption has not fully recovered.

Beer for instance, saw a lower sales volume by 8.7%, in-line with several industry indicators according to management. Coupled with higher A&P expenses attributable to the launch of Federbrau, net profit was down 34% to THB606m.

In addition, pre excise tax implementation on 18 Sep, the group has not seen a significant build-up in stock for Spirits by trade agents. On competition and new entrants, we believe Spirits segment hold defensive moats underpinned by significant market share, extensive scale and distribution network. We understand Beer’s market share has also been generally stable.

Potential Acquisition in QSR Segment

With the group’s potential acquisition of over 240 existing KFC stores in Thailand for ~THB11.3b (approx. S$463m), the group can leverage on KFC’s network to distribute its portfolio of beverages, which could also bode well for Beer given the room for growth in the food service space. All considered, we maintain our BUY and fair value estimate of S$1.01. There were no further comments on the corporate restructuring.

Source: OCBC Research - 14 Aug 2017