STI : 3191.08
(Downgrade from BUY)
Price Target : 12-Month S$ 0.57 (Prev S$ 0.80)
More time needed
• 3Q below our above-consensus expectations
• Beer/ non-alcoholic beverage facing challenges
• Revised our optimistic FY13-15F earnings down by 15-20%; notable growth expected only in FY15F
• Downgrade to HOLD, TP cut to S$0.57
3Q below our above-consensus expectations. 3Q13 core net profit grew by 36% y-o-y to THB4.1bn, from THB3bn in 3Q12, despite revenue falling by 7% to THB35bn. The growth
came largely from contribution of its associate stake in FNN. Stripping out FNN’s profit contribution, ThaiBev’s net profit fell by 23% to THB3.7bn.
Beer and non-alcoholic segment facing challenges. Beer and Non-Alcoholic Beverage (NAB) sales volume disappointed in 3Q13, while Spirits’ volumes managed to show sequential volume growth of 7% from 2Q13. Beer revenue slipped by 9% as volumes dipped 14% arising from a hefty 15-20% ASP increase (due to a new excise tax passed on 4 Sep’13). NAB segment faces keen competition, and with lower sales (-52% y-o-y) and higher expenses, the segment registered a loss of THB419m in 3Q13.
Cut FY13-15F earnings by 15%-20%, TP down to S$0.57; downgrade to HOLD. We revised our forecasts down by 17%/ 20%/15% for FY13F/14F/15F. We expect competition to remain keen for its NAB segment while the Beer segment is likely to continue to see declining volumes on the back of the recent hefty price increase. We have also lowered Spirits’ gross margin assumption to c.32%, from 34-34.5% previously. While we like the strong cash generation of its stable Spirits business, the projected slow ramp up and uncertainty in its other segments would be a drag on overall growth. We expect growth momentum to pick up meaningfully only in FY15F, which is still some time away. With the downward revision in earnings, our SOP-based TP is cut to S$0.57. In view of the limited upside, we downgrade ThaiBev to HOLD.
Publish date: 15/11/13