Thai Beverage set for ‘big year,’ UOB KayHian says

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.

Thai Beverage appears set for a “big year,” with a domestic consumption recovery expected alongside Thai elections, which historically have driven beer demand, UOB KayHian said in a note on Monday.

“With strong influence from year-end seasonality as well as the impending elections, we are expecting a robust 1HFY19 for THBEV,” the brokerage said. “However, a structural recovery in purchasing power, especially in the rural communities, may not have rolled in yet, judging from household debt levels which remain slightly high.'”

The brokerage pointed to data from the Office of Industrial Economics indicating Thailand’s beer volume improved, rising 15.0 percent and 16.1 percent on-year in October and November respectively.

“Towards end of the year, volumes are usually seasonally stronger, and due to low base effect, there looks to be some festive cheer in domestic consumption,” it said.

It also pointed to reports that the Commerce Ministry was set to bolster prices of key farm products this year if their prices fall below the Ministry’s targets, which should slow the slide in rural consumption.

UOB KayHian also noted that ThaiBev recently restructured Sabeco-related loans, effectively removing its joint venture partners and gaining more transparent control of the Vietnamese beer company.

It kept a Buy call with S$0.80 target price.

The stock was up 3.52 percent at S$0.735 at 15:08 SGT.

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