• Maintain BUY and SGD0.71 TP, 37% upside with c.5% FY25F (Sep) yield. We stay positive on Thai Beverage due to its strong market leadership in Thailand and Vietnam, with the beer business in the two countries showing recovery and demand improvement going forward. We expect momentum to continue being driven by penetration of sales points and firmer tourism-led consumption into FY25F. The stock trades at an attractive c.11x FY25F P/E, at around -2SD from the historical forward mean of c.18x.

• FY24 net profit in line. Adjusted for the newly consolidated Fraser and Neave (F&N), FY24 earnings came in at THB27bn (-1% YoY) on the back of THB340bn (+2% YoY) revenue. Otherwise, headline revenue outperformed our estimates, as the shareholding increase in F&N from c.28.31% to c.69.64% – from the recent share swap exercise – took effect. Revenue grew across all segments. The spirits, beer, non-alcoholic, and food segments grew by 0.8%, 2.4%, 4.2%, and 5.5% YoY to THB121bn, THB126bn, THB66bn, and THB22bn. Spirits sales were driven by Myanmar and white spirits, beer by tourism and warmer weather, non-alcoholic through brand building, and higher store network for food. Decrease in raw material costs and more efficient opex spending in beer and non-alcoholic beverages supported operating margins of 12.4% on a consolidated basis. A final dividend of THB0.47 per share was declared, amounting to THB0.62 per share for the full year. We maintain our TP and forecasts, as THBEV’s FY24 results are largely in line.

• Expect outlook to be positive. THBEV’s beer business has been positive with both Vietnam and Thailand’s beer market showing firmer demand. Thailand benefitted from sales and consumption increase due to warmer weather and tourism rebound, while Vietnam’s demand recovery was driven by the growing number of sales points and higher sales per distribution point, especially in the north and rural areas. Hence, we expect the beer business to continue driving and supporting earnings growth going forward. In addition, we also expect lower input costs and improving gross margins as raw material inputs which were hedged at higher prices lapse over the coming months. There should be synergies with F&N with the consolidation in the coming quarters, including volume aggregation for raw materials in the supply chain, combined distribution, and cross leveraging on sales and distribution infrastructure to better sell through more products into the market. The spin-off and listing of its beer business would be a catalyst.

• Downside risks to our earnings and recommendation include a slower-than expected pick-up in consumption and increased competition. As THBEV’s ESG score is 3.2 out of 4 – above our country median – we apply a 2% premium to arrive at our SOP-based TP.

Source: RHB Securities Research - 26 Nov 2024