RHB raises Thai Beverage target price after Sabeco loan restructuring

Thai baht notesThai baht notes

RHB raised its target price on Thai Beverage to S$0.85 from S$0.75 after the restructuring of the Sabeco-related loans, effectively giving it a 53 percent holding in the Vietnam-based brewer.

“We believe this move is positive to the group in the long run as Thaibev will have greater control of the business, allowing it to reduce Sabeco’s cost structure and increase efficiencies,” RHB said in a note on Friday. “This, however, slightly dampens near-term earnings, due to the absence of interest charged to Vietnam Bev after the loan restructuring.”

It kept a Buy call, saying that after the stock was one of Singapore’s worst-performing last year, the worst may now be over.

Earnings were impacted by weak alcohol consumption in Thailand last year, but beer production levels in Thailand have risen 10.5 percent in October and 11.2 percent in November, a key indicator of demand, it said.

RHB also pointed to other “feel-good factors” that could boost the stock ahead.

“Throughout 2018, overall rural income was dragged down by the underperformance of sugar, rubber and palm oil prices. That said, we note that the prices of these commodities have bottomed out, which should help to improve the purchasing power of farmers this year,” it said.

“In addition, while the long-awaited general election might see further delays, we have seen the government dishing handouts ahead of the election, which could help to boost near-term spending power in Thailand,” RHB added.

But it kept its earnings forecasts mostly unchanged as increased attributable earnings from Sabeco and Thailand’s alcohol-recovery demand was offset by the absence of interest charged to Vietnam Bev, which was eliminated in the loan restructuring, it said.

Shares of ThaiBev were up 4.23 percent at S$0.74 at 16:57 SGT.


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