ThaiBev (SGX:Y92)-Should We Get Drunk with this Beverage Story?

The Beverage Industry is typically understood to be ‘recession-proof’ i.e. non-cyclic. This is on general premise that the drinkers will continue to have their drink notwithstanding the economy’s performance. Beverage Industry is broadly divided into alcoholic and non-alcoholic segments. There are several players in this industry. But the company that stands out from the crowd is “Thai Beverage”.

Thai Beverage (SGX: Y92) is Thailand’s largest and one of Southeast Asia’s largest beverage companies engaged in the production and distribution of alcoholic (Spirits & Beer) and non- alcoholic beverages and food.

The Spirits segment in engaged in the production and sale of branded spirits products and soda. The beer segment is engaged in the production and sale of raw materials, branded beer products, Chang soda and Chang water. The Non-alcoholic beverages segment covers the production & sale of branded water, ready-to-drink coffee, energy drink, green tea and fruit flavored drinks. The Food segment covers the restaurant and distribution of foods and beverages.

It has quite a diversified business. It derives 46% of the revenue from spirits, 42% from Beer segment, 7% from non-alcoholic beverages and 5% from food segment.

FY20 Revenue growth (YoY) took a slight hit (revenue dropped by ~5% YoY) because of COVID19 related restrictions in many countries. The Spirit segment fared well (went up by ~2%) but the Beer segment was the most impacted segments, it fell down by 15% (YoY basis).  

On historical performance basis, 5-year CAGR of its revenue has been close to 12%.

FY20 net income fell down by 2.2% YoY. Net income contributed by –

  • Spirit Business                 – went up by 14.7% (This has largest share of 85%)
  • Beer business                  – went up by 7.3% (Its contribution is 14%)
  • Non-alcoholic business  – went up by 165% (Its contribution is 1%)
  • Food Business                 – went down by 121.4% (Its contribution was between 0 to -1%)

On historical performance basis, 5-year CAGR of its net income has been close to 4%.

Geographical breakdown of revenue

Geographical revenue breakdown is as follows-

It derives 71% of total revenue from Thailand, 23% from Vietnam and remaining 6% from rest of the world. Its 90% of the spirit revenue comes from Thailand. So, in that sense, spirit revenue is quite concentrated in just one country.

But revenue from Beer is quite diversified : 53% of its beer revenue comes from Thailand, 46% of beer revenue comes from Vietnam and 1.2% from rest of the world.

Revenue from other segments – Non-alcoholic beverages and food are majorly coming from Thailand.

Dividend Yield

It has consistently paid decent dividends. It also managed to increase the dividend per share since 2006 till 2014.

Performance Ratio

Most of the ratios have shown an improvement over the prior year (except Return of Equity and Return on Assets). But Return on Equity (at above 15%) is still at quite good level.

Near to medium term trigger

Below are few of the near-to-medium term trigger that will benefit the company –

  • Easing restriction of on-premise consumption (alcohol ban was lifted in Thailand on 1st Feb 2021).
  • Thailand Government plans to allow vaccinated traveler, in order to revive its tourism industry.
  • Singapore exchange has approved BeerCo’s IPO plan last week (the beer business of ThaiBev is poised to be spun off for a separate listing). This may trigger a re-rating for the company.

Disclaimer

Our content is for informational purpose only. We don’t recommend the stocks by such analysis. You must do your own research before undertaking any investment making decision.

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Published by Amit

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