Wolf Money(Thai Beverage PCL)




(Leading Beer Brand in Thailand, Chang beer)

(Leading beer brand in Vietnam, Bia Saigon)

I have rolled over some of the capital received from Nam Lee and Singapore Medical Group sales into Thai Bev for some capital management. The stock is unlikely to give you a 1 fold return in the short term. A realistic 10-15 percent target including dividend is more appropriate. The stock is trading at close to year low probably due to resurgence of covid 19 cases in Thailand and Vietnam plus the uncertain political situation in Myanmar. I had done some research on the company. The covid situation seem to have little or no impact on profitability. 2nd quarter result was up 20% and half yearly result up 8%. That put Thai Bev share price at around 15x forward p/e which is at the lower range of their historical valuation of 15x-20x price to earning ratio. 15x p/e has always been a good support level for the past 14 years. A classic case of market inefficiency, profitability had gotten better but share price had fallen. The covid 19 situation in Thailand and Vietnam has done little to dampen profit as beer and spirits are sold off trade. Off trade consumption mean direct to consumers to be consumed outside of pub, bar, nightspot or beer garden. Drinking from home is the default arrangement. 

(90% market share in spirits market)

Thai Bev brands of spirits totally kill the competition with an insane 90% market share. They own 75% Grand Royal, the largest whiskey producer in Myanmar.  That pie of the business is experiencing strong growth. Thai Bev has other non alcoholic beverage and food business through ownership of Oishi and FNN. Thai Bev also had an agreement with Yum Brands for KFC franchise in Thailand. Alcoholic Beverage still make up 90 percent of their business.

(FNN soft drink)

I usually don’t buy big cap or blue chip since I am not a fund manager which require liquidity to absorb big investment dollars. Short term cash management seem more appropriate for me with an eye for better buy if one come along. Imho Thai Bev is a better alternative to cash which is earning close to 0% interest. Thai Bev pays a 2.5% dividend yield. The elevated stock market is a concern for me which make Thai Bev somewhat perfect defensive play with growth potential. If the Thai and Vietnam economy reopened after covid. Thai beverage will benefit. Share of Thai Bev is down 9% since the start of the year and down 20% from Feb high of 85c.

Risks associating to Thai Bev are mostly regulatory for e.g tax increase on alcoholic beverages, ban on alcohol sale amid surging covid 19 case in Thailand which the authority had done it last year or advertisement restriction on national tv during certain hours or raising of minimum eligible age for drinking. Other than that, the demand for Thai beverage alcoholic products are mostly inelastic. 

The value proposition for Thai Bev can come from the controlling stakes in Fraser Property(29%) and FNN(29%) which is worth 1.3b and 600m respectively. Fraser Property control Fraser Centrepoint trust and Fraser Commercial & Logistic trust which have a combine total of 10b in market capitalisation. There is also a refocus by Fraser Property Ltd to extract value out of their properties as seen from recent Northpoint and Bedok Point shopping centre divestment. Fraser Property Ltd is trading close to 50 percent discount to book value. Any substantial divestment by Fraser Property can have a positive impact on Thai Beverage financial position.

The management had also indicated their willingness to list their beer business(Beer Co.)on SGX at a suitable timing which can be worth up to USD10b. The Beer Co comprise of Thailand and Vietnam business with Chang and Bia Saigon beer been the leading brands in both countries respective. Thai Bev has a whopping 40 percent market share in Thailand and Vietnam. Vietnam in particularly is an attractive market with beer consumption going up by 40 percent within the last 10 years. Vietnam is also one of the top fifteen beer drinking nation. The country population age profile is one of the youngest in ASEAN which make them a highly desirable market for Thai Bev or any fmcg company. Sabeco 1Q result is encouraging, net profit up 38 percent. Thai Bev has a 53% stake in Sabeco, the largest beer company in Vietnam. Any potential listing might attract interest in the company shares and a special dividend might be on the card for shareholders of Thai Bev. The timing of the listing is at best unclear. The listing had been postponed twice in the last 20 months due to adverse market condition. Last try was aborted in April 2021.



(Sabeco 1Q result up 38 percent, recovery is on track)

In celebration, people drink beer, in sorrow people drown on it. A Champagne quote by Churchill shows the importance of alcohol “In success we deserve it, in defeat we need it”. Beer consumption in generally hold steady irregardless to the current state of the economy. Thai Beverage share doesn’t set the pulse racing but the company does have strong competitive moats due to its strong brands and market leading position in Thailand, Vietnam and Myanmar. Thai Bev exhibits Buffett-like type of business which is rare in Singapore market. BTS anyone? Beer To Share😆 

*Wolf Bargain(BTS) post has twice the number of views proving BTS to be a very marketable 3 letters word.


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Disclaimers 

All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for information only. Buyer beware,do you own due diligence.


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