Position for Laggard Recovery Play; Maintain BUY

• The deferment of BeerCo’s IPO coupled with the resurgence of COVID-19 cases in Thailand and Vietnam may pose share price weakness for Thai Beverage (SGX:Y92). However, we think that this presents an opportunity for investors to position in this laggard as a post-COVID recovery play.
• Thai Beverage is still trading at 15x FY21E P/E, which is -1 standard deviation below its 5-year mean and at a 65% discount to its global peers’ average of 45x. Maintain BUY with target price of S$0.95, pegged to 20x FY21E EPS.

Deferment of BeerCo’s Listing

• Thai Beverage has decided to defer the spin-off listing of its beer business and SABECO (collectively BeerCo) in view of the current uncertain market conditions and worsening COVID-19 situation in Thailand and other countries.
• That said, Thai Beverage believes that BeerCo offers a compelling growth story, given its leading position in the beer market within Southeast Asia. The spin-off will be reviewed at an appropriate time. Thai Beverage will closely monitor the market conditions and explore opportunities to maximize shareholders’ value.

Opportunity to Position for Post-COVID Recovery

• The deferment of BeerCo’s IPO is likely due to a lower-than-expected COVID-19 cases in Thailand and Vietnam may pose share price weakness for Thai Beverage. However, we think that this presents an opportunity for investors to uplift its already high brewery utilisation rate (80% in FY20).

ThaiBev's Share Price Supported by Cheap Valuation

• We acknowledged a heightened risk for Thai Beverage on the back of a resurgence in COVID-19 cases in Thailand and Vietnam, as well as the absence of a catalyst from the BeerCo IPO. However, Thai Beverage's share price is still trading at 15x FY21E P/E, which is -1 standard deviation below its mean and at a 65% discount to its global peers’ average of 45x.

• The most bearish scenario presents a share price of S$0.60, pegged to 15x COVID cases as compared to a full lockdown last year.

Source: Maybank Kim Eng Research - 19 Apr 2021