KGI: Weakness in Thai Beverage shares is opportunity to buy

Cans of Chang beer at a Singapore supermarket; taken September 2018. The Chang brand is owned, brewed and distributed by Thai Beverage.Cans of Chang beer at a Singapore supermarket; taken September 2018. The Chang brand is owned, brewed and distributed by Thai Beverage.

Recent weakness in Thai Beverage shares after its earnings results disappointed is an opportunity to buy, KGI said in a note on Wednesday.

In late November, Thai Beverage reported its fiscal full-year net profit dropped 40.2 percent on-year to 20.73 billion Thai baht amid lower profit contributions from the spirits and beer businesses and a wider loss in the non-alcoholic beverage business. It also pointed to expenses related to a business acquisition and a Sabeco-related finance cost.

Revenue for the fiscal year ended 30 September rose 21 percent on-year to 229.70 billion baht amid higher sales in the beer business and food business, although that was partly offset by a decline in sales in the spirits business and the non-alcoholic beverages business, ThaiBev said.

KGI said revenue was in line with its expectations, although net profit missed its forecasts.

But the brokerage was positive on the outlook, noting that company management expected the upcoming elections to drive a rebound in alcohol demand and as the effects of an excise tax hike fade.

KGI said wage recovery was key to a rebound in alcohol demand, with the tepid wage recovery potentially turning around as Thai farmers experiment with different crops to benefit from government subsidies. It also pointed to recent e-commerce initiatives, such as Alibaba Group’s move to set up a Thai rice flagship store on Tmall.com.

“In the coming quarters, we continue to expect a recovery in domestic alcohol consumption due to stronger consumer confidence and rising agriculture prices,” KGI said.

It kept a Buy call with a S$0.75 target price.

The shares ended Wednesday down 2.40 percent at S$0.61.

 

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