SINGAPORE (Dec 3): Something is brewing at Thai Beverage.

In a regulatory filing on Nov 29, the spirits, beer and non-alcoholic beverages producer confirmed it is “evaluating strategic proposals and opportunities”, including a potential spin-off and listing of its US$10 billion ($13.7 billion) beer business.

The initial public offering (IPO) is said to potentially include ThaiBev’s brewery assets in Thailand and Vietnam.

Controlled by Thailand’s richest man Charoen Sirivadhanabhakdi, the group is best known for producing the Kingdom’s famed Chang beer.

The group also owns a controlling stake in Vietnam’s leading beer maker, Saigon Alcohol Beer and Beverages Corp (Sabeco), which produces Saigon Beer and 333 Beer.

ThaiBev also brews Archa beer and the German-inspired Federbrau brand.

Shares in ThaiBev surged as much as 5.2% on Nov 29, as media reports on the potential IPO surfaced.

See: ThaiBev said to consider IPO of US$10 bil brewery business: Update

The IPO is likely to be the biggest listing in Singapore in about a decade, ousting the 2011 listing of Hutchison Port Holdings Trust, which raised some US$5.5 billion.

According to data collated by Refinitiv, a Singapore IPO of just over US$2 billion would make it the biggest listing in the country in about six years.

The way UOB Kay Hian analyst Lucas Teng sees it, the potential IPO could well bring about a number of benefits for the company.

For one, Teng opines that this could broaden ThaiBev’s exposure to other companies which would in turn result in a larger market share for the group.

“A potential IPO may allow the segment to deleverage or introduce the unit to strategic partners,” Teng says in a note on Dec 3. “A potential IPO may also introduce AB InBev APAC to a venture into the group, given its interest in the Vietnam beer market.”

However, Teng is quick to point out that there is no certainty that the IPO will happen. “Such strategic projects are still at the exploratory or early stages,” he notes.

But even if ThaiBev’s IPO plans are shelved, Teng believes that the group still has a number of aces up its sleeves.

“While there is no assurance of a deal, with the company stating that discussions are in the exploratory stages, we note that expansion and maintenance plans are on the cards for its beer segment,” Teng says, adding that these could provide some impetus for the group.

For instance, ThaiBev’s hold on Sabeco saw it construct a brewery recently, with total production capacity standing at 2 billion litres annually.

In addition, through an indirect associated company, Fraser and Neave, Chang Beer had also recently commenced brewing in Yangon, Myanmar in September this year. The brewery has an annual production capacity of 50 million litres.

However, Teng notes that the group’s breweries in Thailand are of a “relatively older age”, and may require maintenance works.

But as Teng sees it, ThaiBev is set to grow – with or without an IPO.

The growth will be on the back of key factors such as consumption growth from government stimuli, an increase in its market share for the beer segment, as well as upcoming mergers and acquisitions, he says.

Teng also highlights that ThaiBev’s beer business remains comparable to its peers, at 15x EV/EBITDA.

Meanwhile, the group’s spirits and food businesses also remain in line with its peers, at 17x EV/EBITDA and 14x EV/EBITDA respectively.

However, Teng points out that the non-alcoholic beer business, which is still loss-making, stands at a discount to its peers.

UOB Kay Hian is maintaining its “hold” call on ThaiBev with an unchanged target price of 90 cents.

As at 1.10pm, shares in ThaiBev are trading 0.5 cent higher, or 0.6% up, at 89.5 cents. This translates to a price-to-earnings (PE) ratio of 19.3 times and a dividend yield of 2.7% for FY20F according to UOB valuations.