Maybank Kim Eng analyst Kareen Chan has kept her “buy” call on Thai Beverage (ThaiBev) with an unchanged target price of 95 cents just days after the group said that it would be deferring its listing of BeerCo on the Singapore Exchange (SGX).


See: Listing of BeerCo on SGX to be deferred due to 'uncertain market conditions'


 

The potential listing of BeerCo, a subsidiary of ThaiBev, was announced on April 16. The decision was due to the uncertain market conditions and volatile outlook, although, the way Chan sees it, the deferment of BeerCo’s IPO is more likely due to a lower-than-expected valuation for the business. ThaiBev was initially seeking a valuation of around US$10 billion ($13.28 billion) for the spin-off IPO.


See also: ThaiBev's BeerCo to list on SGX Mainboard


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To Chan, the deferment of the IPO coupled with the resurgence of Covid-19 cases in Thailand and Vietnam may pose share price weakness for ThaiBev.

That said, the weakness may present an opportunity for investors to accumulate the “laggard” counter as a post-Covid-19 recovery play, she writes in an April 19 report.

Though there may be a heightened risk for ThaiBev on the back of new Covid-19 cases in Thailand and Vietnam, as well as the absence of a catalyst from the BeerCo IPO, Chan says that “the stock is still trading at 15 times FY2021 price-to-earnings (P/E), which is -1 standard deviation (s.d.) below its 5-year mean and at a 65% discount to its global peers’ average of 45 times”.

“We believe ThaiBev’s portfolio of top mass-market brands is well-poised to capture the post-Covid recovery, driven by subsequent easing of alcohol restrictions. Further, its beer business is positioned for margin expansion as the cyclical upturn is expected to uplift its already high brewery utilisation rate (80% in FY2020),” she adds.


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The most bearish scenario, she feels, would be a share price of 60 cents that’s pegged to 15 times FY2020’s earnings per share (EPS).

“We think the probability is low, given that the governments in Thailand and Vietnam have deployed a more targeted approach to contain new Covid cases as compared to a full lockdown last year,” she writes.

While the listing has been deferred, ThaiBev says it still sees BeerCo offering a “compelling growth story” given its leading position in the beer market within Southeast Asia.

The spin-off listing will be reviewed “at an appropriate time”.

As at 4.35pm, shares in ThaiBev are trading flat at 71.5 cents, or 2.8 times P/B according to Maybank's estimates.