SINGAPORE (Aug 14): RHB is keeping its “buy” rating and $1.10 target price unchanged, noting that the group has maintained its market share in its key brands across all divisions despite a challenging market environment.
See also: Thaibev reports doubling of 3Q earnings to $628 mil
After three quarters of declining volumes, spirit consumption in Thailand has finally made a turnaround in 3Q17 ended June, with a 4.3% y-o-y growth in volume and 4.5% y-o-y growth in revenue. Management attributed this to the low base of spirits sales in 3Q16.
In a Monday report, analyst Juliana Cai says: “We think 4Q17F would see a continuation of the positive growth trajectory as we expect trade agents to stock up on inventory before the excise tax hike in Sept. The spirits division is Thai Beverage’s largest segment, contributing 57% to topline and 82% to EBITDA, and it has a 80% market share in Thailand’s spirits industry. Therefore, an uplift in spirit volumes would continue to bode well for the group.”
As for its beer business, Thaibev has maintained its 40% share in the market despite keen competition. This was aided by the launch of Federbrau beer, which gained a 0.5% market share. However, Cai notes that consumption of beer remained slow in 3Q17. According to a study by AC Nielsen, beer demand continued to decline by 10% in 3Q17.
Trade consumption continues to be soft in Thailand as seen from weaker sales in Thaibev’s beer and non-alcohol beverages in the food businesses. However, the mourning period of the late King Bhumibol Adulyadej is coming to an end. Moving into FY18, Cai expects to see a step-up in beer volumes and a recovery in on-trade consumption on the back of pent-up demand.
Shares in Thaibev are trading at 93 cents.
