Thailand’s new excise tax law was announced and made effective immediately. The law is aimed at making tax collection more transparent and officials expect ‘moderate’ rises in prices for products such as alcoholic beverages. The new law is based on the retail price, instead of exfactory prices previously.

In relation to Thai Beverage’s beverage portfolio, it has been reported that tax for beer will rise by THB0.50 per can and THB2.66 per bottle. White spirit will be taxed more by THB0.84-3.49 per bottle. For other types of locally produced spirits, the additional tax will be THB8 per bottle for 28% alcohol content and THB30 for 40% alcohol content. Sugary drinks also face higher taxes – soft drinks will be THB0.13-0.50 per bottle, while sugar-free soft drinks will be taxed less by THB0.28-0.36 per bottle.

While it is not yet clear as to the extent of price adjustments that might be made given the change, there could be some pre-stocking up of goods by traders. We keep in mind that the current 3Q (4QFY17) is seasonally the softest consumption period for the group.

Despite short term effects, looking towards FY18, we believe A&P efforts will be more effective and on-premise consumption may recover following the end of the mourning period in mid-Oct.

We have a BUY and S$1.01 FV on the stock.

Source: OCBC Research - 18 Sept 2017