• The COVID-19 pandemic has resulted in a partial lockdown in Thailand. In the latest measure to contain the spread of the virus, the Government has postponed the Songkran holidays (13-15 Apr) to deter gatherings. All provinces have also banned the sale of alcohol during this period.
• We lower our Target Price to $0.79 as we expect Thai Beverage (SGX:Y92) to experience some negative impact from this development. Maintain BUY.

No Alcohol During Songkran

• Thailand has banned the sale of alcoholic drinks and closure of venues selling alcohol during the Songkran holidays to prevent the viral contagion. The ban periods for provinces differ with some bans only lasting two days, some until 30 Apr, while others are until further notice. In Bangkok, the ban would last from 10-20 Apr. The Government has postponed the festive holiday but new dates have not been set.

Some Disruption But Impact Is Limited Compared to Other Discretionary Players

• We lower our Thai Beverage's FY20F-22F (Sep) earnings by a modest 3-4% amidst the latest alcohol ban. We think 1HFY20F earnings would stay healthy as the group has already reported a strong 1QFY19 PATMI of THB8.4bn while industry sales have remained decent up to Feb 2020.
• For the period of 1 Oct 2019 to 29 Feb 2020, Thailand’s domestic beer sales have grown 7.4% y-o-y. In addition, there were media reports of consumer stocking up on alcoholic beverages ahead of the ban, suggesting that alcohol sales could still be propped up in early April. Since 60-70% of its products are consumed off-premise, we think the impact to Thai Beverage would be limited relative to products consumed on-premise.

YTD Correction Presents Opportunity for Longer-term Investors

• With the lockdown measures in place, we think the worst may be over for Thailand as the number of new COVID-19 cases has come down from its peak in late March.
• We expect the lockdown measures in Thailand to ease in stages. However, FY21F sales growth would be dependent on the recovery of the country’s economy after the pandemic is contained.
• Key risks include prolonged ban on alcohol, economic slowdown in Thailand, disruption in supply chain, market sell-down amidst worsening COVID-19 outlook.

Source: RHB Invest Research - 16 Apr 2020