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Valuation for ThaiBev's subsidiary tender offer ‘on the high side’, says DBS

Felicia Tan
Felicia Tan • 3 min read
Valuation for ThaiBev's subsidiary tender offer ‘on the high side’, says DBS
Based on the timeline of Oishi’s privatisation, Sermsuk’s privatisation is expected to take around five to six months to complete. Photo: The Edge Singapore
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The team at DBS Group Research has maintained its “buy” call on Thai Beverage Y92 -

(ThaiBev) and target price of 69 cents as the group took another step to restructuring its food and non-alcoholic beverage (NAB) businesses.

ThaiBev announced, on July 3, that it will make a tender offer of 63 baht ($2.33) per share for all 93.9 million shares that it does not already own in Sermsuk Public Company following approval from the group’s board of directors. The group intends to delist Sermsuk from the Stock Exchange of Thailand (SET) upon the successful closure of the offer.

The offer price, which represents a 28% premium to Sermsuk’s last trading price as at July 3, values the company at 16.8 billion baht, or 68 times its FY2023 net profit of 248 million baht.

As at Dec 6, 2023, which is the latest record date for Sermsuk’s shareholders, ThaiBev’s indirect wholly owned subsidiary, So Water, holds 171.95 million shares in Sermsuk, or a 64.67% stake.

“The transaction is expected to cost 5.9 billion baht, [which is a] relatively small amount compared to its cash and cash equivalent of 46.2 billion baht as of March 31,” notes the DBS team. The amount is expected to be funded via internally generated and, or externally sourced funds.

Compared to the privatisation of another ThaiBev subsidiary Oishi a year ago, which cost the group some 4.5 billion baht, the valuation for the Sermsuk transaction is "on the high side", as the offer price is pegged to the latter’s current share price.

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“Post-acquisition, we estimate that [ThaiBev's] net debt to ebitda would increase slightly from 3.2 times as of March 31 to around 3.3 times, which remains manageable,” the team writes in its July 4 update.

Based on the timeline of Oishi’s privatisation, Sermsuk’s privatisation is expected to take around five to six months to complete.

Following the privatisation, the DBS team does not foresee any major changes to Sermsuk’s operations given ThaiBev’s current majority stake in the former.

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Sermsuk is a leading NAB company in Thailand with a portfolio of carbonated and non-carbonated drinks including the country’s own Est Cola, Crystal drinking water and Oishi ready-to-drink green tea. It became a part of the ThaiBev group after Thai Beverage Logistics acquired all 265.9 million of its shares for 15.4 billion baht or 58 baht per share in 2012.

On Dec 28, 2015, Thai Beverage Logistics sold the company’s 171.9 million common shares to So Water Company, an indirect subsidiary of one of the group companies of ThaiBev.

“With the recent slide in share price, [ThaiBev’s] valuation is attractive with a yield of [over] 5%,” says the team.

Shares in ThaiBev closed 1 cent higher or 2.3% up at 44.5 cents on July 4.

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