• Thai Beverage proposes to list its beer business (under BeerCo Limited) on the Main Board of the SGX, with a public offering of up to ~20% shares.
• Purported valuation of US$10bn could re-rate Thai Beverage. Looking back at 2019, when news first emerged, Thai Beverage's share price traded up to S$0.935.
• Reiterate ADD with target price S$0.87.

Listing of BeerCo Not New, But Refreshed

• Thai Beverage (SGX:Y92) proposes to list subsidiary BeerCo (restructured to hold the Thai beer and 53.58% stake in SABECO) on the Main Board of Singapore Exchange, via a vendor sale of up to ~20% of BeerCo’ issued shares (“proposed vendor sale").
• Thai Beverage is aiming to list BeerCo to:
  1. dedicate heightened managerial focus on its beer business;
  2. improve the group’s gearing (assuming part of the proceeds from the proposed vendor sale are used to repay interest-bearing debts); and
  3. unlock shareholder value (transparent valuation benchmark for BeerCo).
• Thai Beverage intends to retain a significant majority shareholding in BeerCo post listing.
• The IPO plan for Thai Beverage’s beer segment is not new. It was first brought up at end-2019. Looking back to 2019, Thai Beverage's share price traded up to a maximum of S$0.935.

Potential US$10bn BeerCo Valuation Could Lift Thai Beverage's Target Price to S$1.17

• According to recent news articles, Thai Beverage could seek up to ~US$10bn valuation for BeerCo, and raise ~US$2bn (we think to be utilised to pare down debts).
• The US$10bn valuation implies a FY20 P/E of > 60x on BeerCo’s FY20 PATMI of S$199m. For reference, SABECO and Budweiser Brewing Company are trading at a CY21F P/E of ~22-39x.
• Refer to Figure 1 in report attached below for details on Thai Beverage's target price calculation. We currently value Thai Beverage’s beer business at an enterprise value (EV) of THB144.5bn (~US$4.4bn). Assuming a US$10bn valuation for BeerCo, Thai Beverage keeps an 80% stake, and that the US$2bn proposed vendor sale proceeds would go to pare down Thai Beverage’s group debt; our sum-of-parts target price for Thai Beverage could go up to S$1.17.

Maintain ADD

• A US$10bn valuation puts BeerCo’s valuations at the higher-end vs its peers. Nevertheless, we would be positive on a successful listing for Thai Beverage’s beer unit as that could pare down Thai Beverage’s debt at the group level.
• Thai Beverage is looking to release its 1QFY21 (Oct 2020 to Dec 2020) results on or about 10 Feb after the market closes, to provide an update of the financial performance of the BeerCo Group and the Thai Beverage Group, and the BeerCo Group’s contribution to the Thai Beverage Group.
• We await further details on the deal before making any changes to our forecasts and target price for Thai Beverage.
• Key downside risks: lower-than-expected valuation for BeerCo and lower net earnings.

Source: CGS-CIMB Research - 5 Feb 2021