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RHB maintains 'overweight' on F&B sector, names ThaiBev, Delfi and Food Empire as top picks

Nicole Lim
Nicole Lim • 3 min read
RHB maintains 'overweight' on F&B sector, names ThaiBev, Delfi and Food Empire as top picks
Analyst Alfie Yeo anticipates consumption to accelerate in 2024, with GDP growth and tourist recovery across Thailand, Vietnam and Indonesia. Photo: Bloomberg
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RHB Bank Singapore’s analyst Alfie Yeo is maintaining his “overweight” call on the food & beverage (F&B) industry, as he anticipates consumption to accelerate in 2024. 

Yeo names ThaiBev, Delfi and Food Empire as his top picks, with “buy” calls and target prices of 82 cents, $1.55 and $1.53 respectively. He says that each of these stock picks are trading below their respective historical P/E mean, have attractive dividend yields, and all have strong returns on equity (ROEs) of 14%-19%. 

“We stay positive with buys on our midstream consumer universe... which are beneficiaries of recovering consumption across Thailand, Vietnam and Indonesia,” says Yeo.

The analyst sees stronger regional consumer spending ahead on stronger domestic consumption, accelerating gross domestic product (GDP) growth, and tourist recovery. 

The sub-sector valuation of 8 times - 12 times FY2024 P/E is compelling, with 4.3% - 5.3% dividend yield and FY2024 earnings growth of 5.8% y-o-y, he adds. 

Yeo says that consumer sentiment has remained robust since his last sector update in Oct 2023. 

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He notes that Thailand’s Nov 2023 consumer confidence has recovered to an all-time high (about 60 points) since the Covid-19 lockdowns but remains shy of pre-pandemic levels (about 70 points), driven by government stimulus and tourist arrivals. Similarly, Indonesia’s consumer confidence index has remained robust at about 125 points for Oct and Nov 2023 – well above Sep 2023’s reading and 2022’s numbers, due to a steady labour force participation and employment rates. 

The analyst highlights that regional GDP growth recovery is on the cards, as he continues to see marketing teams increased spending on brand investments and promotions to capitalise on recovering consumer confidence. 

“Our economics team estimates that Thailand and Vietnam’s GDP growth are each expected to accelerate from 2.5% and 4.7% this year to 4% and 6.4% next year. Meanwhile, Indonesia’s GDP growth is forecast to maintain at a robust 5% next year,” says Yeo. 

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Although the analyst moderated his sub-sector earnings growth compound annual growth rate (CAGR) from 4.8% he expects the sector to ring in earnings growth of 5.8% and 7.2% y-o-y for FY2024 and FY2025, driven largely by revenue growth, on the back of improved consumer demand and spending outlook. 

Noting that Food Empire is slightly riskier given its exposure to swings in the Russian ruble and risk events happening within its key markets, Yeo favours Delfi and ThaiBev over Food Empire as his stock pick strategy. Delfi’s exposure to Indonesia’s consumption recovery and ThaiBev for its Thailand and Vietnam’s domestic consumption recovery. 

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