SINGAPORE (June 14): CGS-CIMB Research says Thai Beverage is one of its top picks among Singapore-listed consumer stocks, given the kingdom’s improving domestic beer consumption.

CGS-CIMB also favours ThaiBev due to the strength in the Thai baht and also its valuation gap to other Thai-listed peers.

“We expect the share price to perform well when results deliver,” says CGS-CIMB which is maintaining ThaiBev at “buy”.

In April, domestic beer consumption was up 21% y-o-y, reversing from the slow demand growth in March, according to Thailand’s Office of Industrial Economics.

Although the inclusion of Sabeco and exports could have distorted ThaiBev’s y-o-y numbers, CGS-CIMB says -- on a 7-month basis from Oct 2018 to April – the kingdom’s beer consumption has grown 9% y-o-y.

“We believe ThaiBev will grow in tandem, given that it is the second-largest beer player in the market with an approximate 40% market share,” says analyst Juliana Cai in a Thursday report.

Meanwhile, Thailand retail sales were up 12% y-o-y in the last two quarters while farm income was stable.

“We believe the economic stimulus package – including state welfare cards to 14.5 million low-income earners and personal income tax deductions – should help boost domestic spending,” adds Cai.

In addition, about 85% of ThaiBev’s PATMI is derived from Thailand, estimates Cai.

Year to date, the THB/USD has appreciated 4% while regional currencies stayed flattish.

“Amid market uncertainties revolving around US-China trade tensions, we favour ThaiBev over other Singapore-listed consumer companies, given the strength of the THB compared to regional currencies,” says Cai.

Based on CGS-CIMB’s forecast, ThaiBev is trading at 21x FY19F P/E, which it thinks is “undemanding”.

“Our SOP-derived target of 92 cents implies a forward P/E of 23x. This is still very reasonable when compared to other alcohol players – that are trading at 32x – and Thailand-listed consumer stocks, which are trading at an average of 26x,” says Cai.

Shares in ThaiBev closed flat at 84 cents on Friday.