Thai Beverage downgraded to Reduce by Phillip Capital after earnings miss

Thai baht notesThai baht notes

Phillip Capital downgraded Thai Beverage to Reduce after fiscal third quarter earnings missed its forecasts and amid a poor outlook for rural incomes in Thailand.

Thai Beverage reported last week that its fiscal third quarter net profit fell 56.5 percent on-year to 8.646 billion Thai baht amid a lower contribution from the spirits business, a wider net loss from the non-alcoholic beverage business, a sharp decrease in contribution from F&N/FPL and the lack of year-earlier fair valuation gains.

“Hurting the consumption of spirits has been the weak agriculture prices and fishery industry in Thailand. Any recovery for this rural or farming community will come from improvement in commodity prices such as rubber or tapioca. We have yet to see a meaningful improvement,” the brokerage said in a note on Friday.

It also pointed to income issues in urban areas.

“High household leverage plus short work times in manufacturing sector (i.e. less overtime) has translated to lower disposable income. As a
result, we see trading down by consumers into lower price point, which are the white spirits. Thai Beverage has not lost market share but is suffering from the sliding macro environment,” it said.

Phillip Capital cut its fiscal 2018 earnings forecast by 19 percent after the results, and lowered its target price to S$0.62 from S$1.05; it also cut its dividend per share forecast to 0.41 Thai baht, down from 0.52 baht.

Shares of ThaiBev were flat at S$0.65 at 11:59 A.M. SGT on Tuesday.

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