• Consumption recovery in sight with easing lockdown measures in operating geographies and potential stimulus measures in Thailand.
• Lockdown impact may be limited as Thai alcohol sales remained resilient in Jul 21. Thai Beverage is also adopting cost control measures to protect margins.
• Thai Beverage's valuation undemanding at 14.6x CY22F P/E, 1.1 standard deviation below historical mean and at a 47% discount vs regional peers.

Reiterate ADD on Attractive Valuation and Improving Risk-reward

• Reiterate ADD. We believe Thai Beverage (SGX:Y92)’s risk-reward profile is improving with easing lockdown measures in Thailand and Vietnam, which could aid consumption recovery in 1QFY22F (Oct 2021 to Dec 2021).
• Thai Beverage trades at an undemanding valuation of 14.6x CY22F P/E (1.1 standard deviation below its 10-year historical mean), below regional peers’ 27.8x. We believe the current valuation has more than priced in near-term headwinds. Our SOP target price of S$0.84 implies 19.0x CY22F P/E (0.5 standard deviation above 10-year historical mean).
• Potential catalysts include new stimulus measures to support consumer purchasing power in Thailand and better cost control. Resumption of BeerCo IPO plans could also be a medium-term catalyst, in our view.
• Downside risks include prolonged lockdowns in Vietnam and Thailand.

Thai Volumes Resilient in Jul 21; Vietnam Volumes Slowed

• Industry data suggests resiliency in Thai Thai Beverage should be relatively resilient vs peers, given:
  1. its strong presence in off-trade channels, and
  2. it being a potential beneficiary of down-trading, with its positioning as a mass player for beers in Thailand and Vietnam.

Prudent Cost Controls to Tide Through Near-term Headwinds

• We forecast Thai Beverage achieving an EBITDA core net profit growth in 2HFY21F.

Consumption Recovery in Sight

• Both Thailand and Vietnam have the Thai government also raised the public debt-to-GDP ratio ceiling to 70% (from 60%); we think more stimulus measures could be announced to boost domestic consumption and help the economy.

Source: CGS-CIMB Research - 21 Sep 2021