Thailand & Vietnam: Fifa World Cup expected to boost on-trade beer sales in Thailand and Vietnam

The Fifa World Cup competition is expected to boost on-trade sales and consumption of Thai Beverage’s beers, not only in Thailand but also in Vietnam, say analysts.

“We expect the World Cup event happening in June and July to stimulate on-trade consumption,” says RHB Securities while CGS-CIMB Securities says it is hopeful that World Cup festivities could catalyse beer sales in 3Q18.

To recap, ThaiBev’s results for the 2Q18 ended March have improved sequentially, held up by a recovery in spirit volumes sold in Thailand as well as acquisitions in the spirits and food segments, the Edge Singapore reported on May 16.

However, on-trade beer consumption reportedly remains weak, especially in the upcountry areas. As such, volumes were negatively impacted.

Earnings contributions from the acquisition of Saigon Beer Alcohol Beverage Corp (Sabeco) were also eroded by acquisition and finance costs.

Meanwhile, spirits segment continues to be resilient due to higher proportion of off-trade demand. The proportion of brown spirit sales has also increased relative to white spirits.

“We are optimistic on this trend, since brown spirits have a higher price point per bottle and could drive revenue growth faster than white spirits,” says RHB analyst Juliana Cai.

Phillip Securities analyst Soh Lin Sin says ThaiBev’s existing alcoholic beverages segment disappointed, hit by double whammy of protracted weak demand and implementation of a new excise tax. Since Jan 26, all alcoholic beverages have been slapped with an additional 2% of excise tax by law to contribute to the Elderly Fund.

Management attributed weaker beer demand to the stagnant purchasing power of the rural economy - which is its main clientele - due to soft household income, says CGS-CIMB analyst Cezzane See.

To recap, Thaibev’s 1H18 core net profit came in at THB11.6 billion ($485.4 million) or 42.1% of consensus FY18 estimates. Acquired businesses contributed THB2.94 billion to group’s 1H18 revenue and profit, respectively.

PATMI from spirits rose 2.8% y-o-y driven by contribution from Grand Royal while Sabeco contributed THB1.61 billion or 13.7% to the group’s 1H18 net profit, offsetting lower net profit from its existing spirits business.

For Food, Spice of Asia restaurants, KFC restaurants under subsidiary QSA and Havi Logistics contributed THB111.3 million or 34.1% to the group’s 1H18 net profit.

ThaiBev’s share price has tumbled 13.6% year-to-date on uncertainties relating to the Sabeco acquisition and elevated balance sheet risks.

“We believe the downside risks are priced in; hence, we upgrade our call to ‘Add’ from ‘Hold’ previously with an unchanged SOP-based target price of $0.98,” says See of CGS-CIMB.

“Maintained ‘buy’ with unchanged SOTP-derived target price of $1.05,” says analyst Soh of Phillip Capital.

“Maintain ‘buy’ with unchanged target price of $1.06 with 33% upside,” says RHB’s Cai.

17 May, 2018