Thai Beverage downgraded by OCBC on ‘more muted’ spirits outlook

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.

OCBC downgraded Thai Beverage to Hold from Buy after the stock’s strong rally this year.

The stock had run up from S$0.61 at the start of 2019 to as high as S$0.86 in April.

The bank also pointed to “tempered” expectations for the spirits business, the main driver for the beverage player’s bottom-line.

Thai Beverage reported Friday its fiscal second quarter net profit fell 8.6 percent to 6.76 billion Thai baht (S$291.97 million or US$214.33 million) on lower net profit from the spirits, food and F&N/FPL businesses.

Net profit for the spirits segment fell 14.8 percent on-year to 5.15 billion baht amid an increase in advertising and promotion expenses and staff costs, ThaiBev said.

OCBC said the results were within its expectations, but it questioned the outlook.

“Looking ahead, aside from the coronation-related celebrations in May, we expect more muted performance from the domestic spirits segment,” OCBC said in a note Monday.

In addition, while it said cost savings and efficiency moves are underway at Sabeco — including office rationalization and negotiating better bulk purchasing rates — it added that it would take time for those to flow through to the bottom line.

OCBC cut its fair value to S$0.88 from S$0.91.

Shares of Thai Beverage were down 10.91 percent at S$0.74 at 11:59 A.M. SGT.

 

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