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Thai Beverage: Headwinds Ahead


  • Thai Beverage's 53.6%-owned Vietnamese beer company subsidiary Sabeco saw its sales decline in 1QFY2020 due to fake rumors, with further headwinds expected from a new drink-driving law in Vietnam.
  • The coronavirus outbreak is expected to be negative for beer sales volumes in both Vietnam and Thailand, but Thai Beverage's domestic spirits business is expected to be relatively more resilient.
  • Thai Beverage currently trades at 17.2 times consensus forward FY2020 P/E and offers a consensus forward FY2020 dividend yield of 3.0%.
  • Looking for more stock ideas like this one? Get them exclusively at Asia Value & Moat Stocks. Get started today »

Elevator Pitch

I maintain my "Neutral" rating on Singapore-listed alcoholic drinks company Thai Beverage Public Co., Ltd. (OTCPK:TBVPY) (OTCPK:TBVPF) [THBEV:SP].

Thai Beverage's 53.6%-owned Vietnamese beer company subsidiary Sabeco saw its sales decline in 1QFY2020 due to fake rumors regarding sales of the company's shares to Chinese investors, with further headwinds expected from a new drink-driving law in Vietnam which came into effect on January 1, 2020. The coronavirus outbreak is will also be negative for sales volumes of beer in Thailand, given a drop in tourist arrivals and an increasing number of people staying indoors.

On the flip side, Thai Beverage's core domestic spirits business, which accounted for two-thirds of the company's 1QFY2020 EBITDA, is expected to be relatively more resilient during the current coronavirus outbreak. This is because approximately 80% of spirits sales volumes are attributable to domestic consumption at home (versus on-trade channel) in Thailand.

However, a "Neutral" rating is warranted, as Thai Beverage's current valuations are not sufficiently attractive. Thai Beverage traded as low as 10 times forward P/E during the 2008-2009 Global Financial Crisis, which implies significant downside from the stock's current 17.2 times consensus forward FY2020 P/E, if the current coronavirus outbreak takes a longer-than-expected time to be contained.

This is an update of my prior article on Thai Beverage published on December 6, 2019. Thai Beverage's share price declined by approximately -12% from S$0.89 as of December 4, 2019 to S$0.78 as of March 6, 2020 since my last update.

Readers are advised to trade in Thai Beverage shares listed on the Singapore Stock Exchange with the ticker THBEV:SP where average daily trading value for the past three months exceeds $10 million and market capitalization is above $14 billion. Investors can invest in key Asian stock markets either using U.S. brokers with international coverage such as Interactive Brokers, Fidelity, Charles

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This article was written by

The Value Pendulum profile picture

The Value Pendulum is an Asian equity market specialist with over a decade of experience on both the buy and sell sides.

He is the author of the investing group Asia Value & Moat Stocks, providing ideas for value investors seeking investment opportunities listed in Asia, with a particular focus on the Hong Kong market. He hunts for deep value balance sheet bargains and wide moat stocks and provides a range of watch lists with monthly updates within his investing group.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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