SINGAPORE (Dec 18): KGI Securities is keeping its “buy” recommendation on Thai Beverage with an unchanged target price of 75 cents – implying an estimated upside of more than 27% from its current trading price.

The research house says recent weakness in ThaiBev’s share price following the release of its FY18 results has opened up an opportunity to accumulate.

ThaiBev before market open on Nov 27 reported FY18 earnings of THB 18.53 billion ($77 million), down 46% from last year.

The F&B group saw tough domestic alcoholic beverage market amid challenging economic conditions and cautious consumers pending, especially among lower income consumers.

This was exacerbated by the high base effect of higher agent sales in Sep 2017 as they were positioning for an excise tax hike.

See: ThaiBev FY18 earnings down nearly half to $77 mil on tough spirits and beer market

Shares in ThaiBev opened 3 cents lower at 64 cents on the day of its results announcement, and has since fallen another 7.8%. As at 4pm on Tuesday, shares in ThaiBev are trading flat at 59 cents.

“In our view, a recovery in monthly wages will remain key to a rebound in alcohol demand. While wage recovery remains tepid, we believe the situation could turn around as Thai Farmers experiment with growing different types of crops to benefit from government subsidies,” says analyst Marc Tan.

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

In addition, Tan notes that ThaiBev expects the upcoming elections in Thailand to drive a rebound in alcohol demand in FY19 as effects from excise taxes fade.

According to KGI valuations, ThaiBev is trading at an estimated price-to-earnings (P/E) ratio of 17.7 times with a dividend yield of 2.7% for FY19.