SINGAPORE (Nov 25): A recovery seems to be in full swing for Thai Beverage.

Year-to-date, the mainboard-listed Thailand-based beverage producer has romped to total returns of 50.0%, outperforming the total returns YTD of 28.8% for the FSTE Straits Times Consumer Goods Index.

Yet, there seems to be still more room for its share price to climb. Over the past month, six analysts covering the counter have revised their target prices upwards, while only one has moderated the target price downwards.

And ThaiBev’s full-year results for FY2019 – while slightly below consensus expectations – could extend “happy hour” for Thailand’s largest spirits, beer, and non-alcoholic beverages producer.

The group on Nov 22 announced full-year earnings of 23.27 billion baht ($1.05 billion) for FY2019 ended September, 30% higher than a year ago, as revenue grew 16% to 267.36 billion baht.

The higher revenue was led by an 8.6% an increase in sales of spirits business to 115.0 million baht and a 26.6% rise in sales from its beer business to 119.6 million baht.

Sales for its non-alcoholic beverages and food businesses also rose 7.5% and 17.3%, respectively.

Operating profit climbed 24% to 25.56 billion baht in FY2019, from 19.84 billion baht a year ago.

See: ThaiBev posts 30% rise in FY19 earnings to $1.05 bil on higher revenue

“Thailand’s alcohol demand showed strong improvement in 4QFY19 due to government stimulus measures. We expect this consumption momentum to follow through in 1QFY20,” says RHB Group Research analyst Juliana Cai in a Nov 25 report.

Cai is upgrading ThaiBev to “neutral” from “take profit” previously, and raising its target price by 3.3% to 95 cents on the back of higher earnings forecasts for FY20F-21F.

 Another brokerage that is raising its target price for ThaiBev is DBS Group Research.

DBS has a “buy” call on ThaiBev with a higher target price of $1.04, from 91 cents previously.

“The latest set of 4Q19/ FY19 results reaffirms our positive view of the company, and its prospects,” says lead analyst Andy Sim in a Nov 24 report. “We continue to remain positive on the counter and expect its regionalisation strategy to aid earnings growth and re-rate the stock price.”

The way Sim sees it, the group’s Thai domestic operations seems to be on the cusp of recovery after the weak consumption in 2017 and 2018.

He adds that ThaiBev’s acquisition of Sabeco seems to be bearing fruit with the robust growth seen in its recent 3QCY19 results, while Grand Royal continues to post robust volume growth.

ThaiBev’s share of profit of investment in associates and joint ventures grew 27% to 4.85 billion baht in FY2019, from 3.82 billion baht a year ago.

“We like that ThaiBev’s domestic business has stabilised and view improvements at Sabeco as the next medium-term earnings growth driver,” says CGS-CIMB Research analyst Cezzane See in a Nov 23 note.

“Sabeco unveiled that it has kick-started its new product packaging and expects sales growth to continue to see a gradual improvement,” she says, noting that prices were raised slightly in August and September this year for selected stock keeping units (SKUs).

“While Sabeco maintains its earnings growth target of 7% in CY19, we believe it can exceed this, given the 22% y-o-y growth in 9MCY19,” See adds.

See has a high conviction “add” recommendation on ThaiBev, and is raising its target price by 2% to $1.02.

Notably, analysts from Morgan Stanley, Nomura, and JP Morgan also have “buy” or equivalent calls on ThaiBev, with target prices at $1.08, $1.04, and $1.00, respectively.

However, UOB Kay Hian analyst Lucas Teng is less optimistic about ThaiBev.

Teng notes that ThaiBev’s FY2019 core earnings missed the brokerage’s expectations at 93% of estimates.

“The key negative came from the beer segment’s PATMI, which dropped to a net loss for the quarter as it continued to be weighed down by finance expenses,” Teng says.

Factoring in slightly higher finance cost as well as lower associate contributions, Teng is cutting FY20-21 earnings forecasts by 5.1 and 8.9% respectively.

UOB is keeping its “hold” recommendation on ThaiBev, but raising its target price to 90 cents from 87 cents previously.

As at 3.25pm on Monday, shares in ThaiBev are trading half a cent down at 88.5 cents. According to CGS-CIMB valuations, this implies an estimated price-to-earnings (P/E) ratio of 19.2 times, a price-to-book value (P/BV) of 3.8 times, and a dividend yield of 2.6% for FY20F.