Singapore Company Guide Thai Beverage Public Company
Version 6 | Bloomberg: THBEV SP | Reuters: TBEV.SI Refer to important disclosures at the end of this report
DBS Group Research . Equity 29 Jun 2017
Effects of mourning period will eventually pass BUY
Last Traded Price ( 28 Jun 2017): S$0.89 (STI : 3,215.70) Reiterate BUY, TP: S$1.07. We reiterate our BUY Price Target 12-mth: S$1.07 (20% upside) (Prev S$1.09) recommendation on ThaiBev and believe that uncertainties surrounding slower consumption in Thailand from the mourning Analyst Andy SIM CFA +65 6682 3718 [email protected] period is temporary. Pullbacks in share price post a chance to Alfie YEO +65 6682 3717 [email protected] accumulate the counter, in our view. While 1H17 saw results dipping by 2% y-o-y, we believe 2H17 could turn in a better y- What’s New o-y performance on the back of tighter cost control. In addition, the expectations of excise tax increase could lead to distributors • Reiterate BUY on ThaiBev, despite near-term and agents stocking up, thus spurring sales in 4Q17F. On a concerns from mourning period longer-term horizon, we believe its ongoing transformation into • Effects will eventually pass, latest by FY18F a regional beverage player will aid in further re-rating of the counter. Its associate, Fraser & Neave Ltd (FNN) now owns • 2H17 could surprise on costs and excise 18.74% in Vinamilk, and has stated an intention to increase this • Corporate restructuring an added long-term further. catalyst Where we differ? We believe an outright swap with TCC Assets for a higher stake in FNN is unlikely. Instead, we believe ThaiBev Price Relative will rely on FNN as its regional expansion vehicle and increase its stake in FNN only when opportune.
Potential catalyst. Margin expansion from excise tax increase, market share gains in beer and non-alcoholic beverages, faster turnaround in non-alcoholic beverages, corporate restructuring – monetisation/partial divestment property associate’s stake.
Valuation: Forecasts and Valuation We revised our FY17F/18F forecasts down by 8%/7% to reflect FY Sep (Bt m) 2016A* 2017F 2018F 2019F more realistic sales forecasts. Our TP is tweaked down to Revenue 139,153 186,327 199,085 210,553 EBITDA 27,801 37,284 40,951 44,441 S$1.07 (from S$1.09), based on sum-of-parts valuation, Pre-tax Profit 22,679 31,759 35,329 38,851 derived via discounted cashflows of its core operations, and Net Profit 18,920 25,965 28,761 31,500 imputing higher fair values for its stakes its listed associates. Net Pft (Pre Ex.) 18,920 25,965 28,761 31,500 Net Pft Gth (Pre-ex) (%) (28.5) 37.2 10.8 9.5 EPS (S cts) 3.07 4.21 4.66 5.10 Key Risks to Our View: EPS Pre Ex. (S cts) 3.07 4.21 4.66 5.10 Large quantum in excise tax hikes. Increase in excise duties EPS Gth Pre Ex (%) (29) 37 11 10 without a commensurate increase in ASP and/or large Diluted EPS (S cts) 3.07 4.21 4.66 5.10 quantum increase, crimping consumption drastically. Net DPS (S cts) 2.44 2.77 2.93 3.09
BV Per Share (S cts) 19.5 20.9 22.6 24.6 At A Glance PE (X) 28.9 21.1 19.0 17.4 PE Pre Ex. (X) 28.9 21.1 19.0 17.4 Issued Capital (m shrs) 25,110 P/Cash Flow (X) 29.6 19.4 19.6 17.4 Mkt. Cap (S$m/US$m) 22,348 / 16,111 EV/EBITDA (X) 21.2 15.6 14.0 12.7 Major Shareholders (%) Net Div Yield (%) 2.8 3.1 3.3 3.5 Siriwana Co. Ltd 45.3 P/Book Value (X) 4.6 4.2 3.9 3.6 Maxtop Management Corp 20.6 Net Debt/Equity (X) 0.3 0.2 0.2 0.1 Free Float (%) 34.1 ROAE (%) 16.0 20.9 21.4 21.6 3m Avg. Daily Val (US$m) 15.2 Earnings Rev (%): (8) (7) New ICB Industry : Consumer Goods / Beverages Consensus EPS (S cts): 4.29 4.69 5.06 Other Broker Recs: B: 11 S: 1 H: 1 *Note: FY16 results are based on 9-month period, from 1 Jan 2016 to 30 Sep 2016, due to a change in financial year. Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P
ASIAN INSIGHTS VICKERS SECURITIES ed: TH / sa: JC, PY Company Guide Thai Beverage Public Company
WHAT’S NEW
Effects of mourning period will eventually pass
Reiterate long-term BUY, accumulate on pullbacks. We 2H17F to see lower revenue than 1H17, but bottom line reiterate our BUY recommendation on ThaiBev and believe could surprise on cost savings. Based on historical that uncertainties surrounding consumption in Thailand from performance, the quarters ending March and December tend the mourning period is temporary. Granted that our to register stronger sales vis-à-vis June and September expectations for a quicker uptick were misplaced and quarters due to seasonal effects. We estimate that 1H sales consumption has been slower in the past eight months, it will revenue (i.e. for quarters ending December and March) tends gradually revert to normalcy, in our view. to be c.55% of the full year's. While ThaiBev's management has indicated that 2H17 revenue is unlikely to match 1H17's We revised down our forecasts by 8%/7% for FY17F/18F as given the seasonally slower period, we understand that the we factor in more realistic sales forecasts, offset by higher focus is now on cost control. Thus, we believe 2H17 could still projected contribution from associates. Notwithstanding this, play some catch up despite the lacklustre 1H17 profits which we opine that pullbacks in share price post a chance to dipped by 2.2% to Bt14.3bn. accumulate the counter. We believe its ongoing transformation into a regional beverage player will aid in Early signs of pick-up in consumption? – Thailand April sales further re-rating of the counter. volume improved by 5% y-o-y. Based on market data, we noted that beer sales volume has been lacklustre since In this report, we explain our continued conviction on the October 2016, registering negative and/or weak growth, company given: possibly due to the sombre mood on the counter. In fact, we i) Weak 2Q17 due to short-term effects, and 2H could show saw a steep 15% slump in beer sales volume in the month of better growth October, given the immediate aftermath of the sombre event. ii) Consumption will eventually pick up Following that, beer volumes have been registering iii) Expectations of excise increase could spur sales in 4Q17 negative/weak growth in the ensuing months. While the iv) Longer-term transformation into a regional beverage uptick of 5% y-o-y in April 2017 may not mean much, this player, with FNN edging up its contribution from Vietnam could suggest that the worst is over and will eventually lead to a pick-up in consumption. Headline drop in 2Q not a trend, but a short-term effect, in our view Share price correction, 2Q17 was weak but…. earlier in May, Thailand Beer sales volume (monthly) (m litres) ThaiBev posted weak 2Q17 results that dipped by 23% from a year earlier. This was indeed below expectations on the back of slower sales revenue (due to slower consumption) and recognition of higher advertising and promotional expenses that was deferred from the earlier quarter (in 1Q17). However, we believe the market has misunderstood that 2Q17 performance marks a downtrend.
Drop due to high base, temporary effects. Instead, the poor performance also stemmed from (i) a high-base effect compared to the same period a year ago (in 2016) as distributors and agents had stocked up in anticipation of an excise increase; (ii) stronger-than-expected beer sales in September-December 2015, after the relaunch of Chang, which resulted in agents replenishing their stocks in the
quarter ending March 2016; (iii) softer volumes in 2Q17 due Source: Bank of Thailand, DBS Bank to the mourning period; and (iv) higher A&P given the deferment from the previous quarter.
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Expectations of excise duty increase could spur sales in 4Q17. seen below, where we plot ThaiBev spirits sales volume vs the With the recent draft of Excise Tax being publicised, the Liquor products CPI index, we noted no sustained downtrend expectations are that it will be effective from September in volumes. In fact, when an increase in excise duty is widely 2017. The new excise tax calculation will change from ex- expected, such as in 2012, there was a discernible increase in factory to one based on retail price before VAT. The formula sales volume to capitalise on this. The upcoming round of and impact is currently unknown, but based on past trends, excise duty increase could see a repeat of this situation. this could spur agents and distributors to stock up, and result in higher sales volume, notwithstanding a seasonally weaker For beer, excise increase may not a be the sole factor in the quarter (ending September). past ten years' volume decline. We also analysed the impact of excise increase on beer, which seems to have a greater Effects of excise increase neutralises over time. A common near-term impact. This could be due to the quantum in the concern relates to the impact of excise increase and the past couple of hikes, amounting to over 20% jump in price. aftermath. In our analysis, we found that sales volume could However, we also noted that sales volume decline could arise be impacted in the immediate aftermath of an excise from political uncertainties, therefore indirectly affecting increase, but this tends to normalise over time. In the charts tourist arrivals.
ThaiBev Spirits vol (trailing 2qtrs) vs Liquor CPI index Thailand Beer vol (trailing 2qtrs) vs Beer CPI & tourists
Source: ThomsonReuters, Bank of Thailand, Company, DBS Bank Source: ThomsonReuters, Bank of Thailand, DBS Bank
Historical Excise duties increase since 2007 Date Type of alcoholic beverage Type of excise From To Remarks
4-Sep-13 White spirits Tax based on wholesale na na c.5-6% increase in excise Brown spirits value, coupled with c.7-28% increase in excise Beer volume c.15-34% increase in excise 22-Aug-12 White spirits Specific rate per litre of THB120 THB150 25% increase in excise costs Compounded spirits pure alcohol (THB/ litre) THB300 THB350 16.7% increase in excise costs Brandy Ad valorem (as % of ex- 48% 50% 4.2% increase in excise costs factory price) May-09 White spirits Specific rate per litre of THB110 THB120 Excise tax costs increase by 8.4% Compounded spirits pure alcohol (THB/ litre) THB280 THB300 Excise tax costs increase by 7.1% Beer Ad valorem (as % of ex- 55% 60% Excise tax costs increase by 26.7% factory price) Aug-07 White spirits Specific rate per litre of THB70 THB110 57.1-70.8% increase in excise pure alcohol (THB/ litre) costs Compounded spirits THB240 THB280 16.7% increase in excise costs Source: Company, DBS Bank
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Where we differ in terms of restructuring? Vietnam now accounts for more than 40% of FNN’s PBIT We note that there have been market expectations of a share contribution. With a higher stake and the treatment of swap between ThaiBev and TCC Assets for FNN, in exchange Vinamilk as an associate (previously treated as an investment) for other listed associates (i.e. ThaiBev exchanging listed by FNN, we estimate that Vietnam accounted for 40% of property associate stakes for FNN shares). We differ in this FNN’s group PBIT in FY16 (up from 23%). Vietnam has perspective and continue to reiterate that this is an unlikely emerged as FNN’s largest contributor, over and above its scenario as per our discussion in an earlier report (ThaiBev – traditionally larger markets – Malaysia and Thailand. “Identifying scenarios to unlock value”, dated 23 November 2016). Opportunity for ThaiBev to increase stake in FNN will arise from the latter’s mega inorganic pursuits, if any. As of March FNN to be the regional expansion vehicle, ex-Spirits business. 2017, FNN has slipped into a slight net debt position, after In our view, ThaiBev is likely to have FNN take the lead in its increasing its stake in Vinamilk. That said, we maintain our regional expansion drive, for businesses outside of spirits/ view that FNN still has ample firepower to leverage on its liquor. As it is, FNN has increased its stake in Vinamilk to balance to undertake acquisitions. FNN has a gearing policy of 18.74% from under 11% previously, which we estimate to up to 80%, and if required, we believe it can undertake have cost the company close to S$1bn. This has depleted equity fund raising. In this scenario, we believe ThaiBev will be FNN’s cash hoard which mainly came about from its able to underwrite the equity issue, and in the process allow divestment of the 55% stake in Myanmar Breweries Ltd back itself (ThaiBev) to increase its stake in FNN. This, as we have in August 2015. always maintained, will circumvent the need for a share swap.
Vietnam is the largest contributor to FNN’s profits, accounting for 40% of FNN’s PBIT in FY16 (proforma) with 18.74% stake
Vietnam accounts for c.40% of FNN’s (FY16) PBIT (proforma)
Source: DBS estimates, Company Source: DBS estimates, Company
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FCL shares +20% YTD; worth S$1.56bn for ThaiBev
Source: ThomsonReuters, DBS Bank
Forecasts and valuation Nonetheless, we reiterate our BUY recommendation on the We have revised down our forecasts by 8%/7% on the back counter, with a revised TP of S$1.06 based on our derived of slower sales projections, which we admit may have been value of its core operations, coupled with higher values for its too optimistic, expecting the mood to revert to normalcy associates. While some investors may be concerned on near- quickly post the initial 100-day mourning period. This is, term performance, we would advocate accumulating on however, offset partially by higher contribution from its pullbacks in share price. We reiterate our view that the weak associate FNN, which is turn benefitted from the 1H17 performance is temporary, and that 2H17 may turn out consolidation of the latter’s investment in Vinamilk as an better for growth, notwithstanding a seasonally weaker half. associate company. In addition, over the longer term, we see its transformation into a regional beverage player. The drive by FNN with an increased stake in Vinamilk is a step in that direction, in our view.
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Sprits vol gwth (%) CRITICAL DATA POINTS TO WATCH
Critical Factors In our study of the historical share price movements and events surrounding it, ThaiBev’s share price can be marked by several key periods (as indicated in Chart A1). In fact, prior to May 2012, its share price had been relatively muted given a relatively subdued growth profile. In fact, we note that ThaiBev tends to be viewed as a defensive counter, outperforming when the market corrects and underperforming in an economic recovery. Spirits ASP gwth (%) Earnings growth is a critical factor. In our view, EPS growth is a main driver of share price, as can be seen in Chart A2, where we plot share price vs 12-month forward EPS. In fact, the correlation is 0.98 between the two variables. Going forward, we are projecting increased segmental profits from beer’s contribution, coupled with turnaround in its Non-Alcoholic Beverage segment.
Leading beer market share by 2020. ThaiBev’s management aims to achieve leading market share for beer by 2020, implying a share of about 45%. This was set in 2015 in its Vision 2020 Beer vol gwth (%) plans. Since the relaunch of Chang Beer, its beer market share has jumped from c.30% to about 40% currently. In fact, based on the previous target set in 2015 (when market share was at about 30%), a proportionate linear increase is about 3-ppt share increase per year. Within a year of Chang relaunch, it had gained 10% points, faster than expectations. Going forward, we project continued increase driven by consistent and targeted marketing activities, and leveraging on its widespread distribution.
Turnaround in NAB will aid in growth. Management targets to Beer ASP gwth (%) achieve breakeven for NAB by FY18F. We are forecasting earnings turnaround for NAB in FY19, which will aid in overall profit growth. This segment incurred net losses of Bt1.8bn and Bt1.1bn in FY15 and FY16 (9-month basis) respectively and an achievement of breakeven will contribute to bottom-line growth for the roup.
Catalyst for share price performance. (i) increased profits from Spirits segment due to margin expansion from excise duty increase and up-selling; (ii) further traction in beer segment gains to be leading market player by 2020; (iii) turnaround in Non-Alc Bev rev gwth (%) Non-Alcoholic Beverages; (iii) Monetisation and/or partial divestment of stake in Frasers Centrepoint Limited; (iv) increased stake in FNN, when the latter undertakes inorganic growth opportunities and when in need of funds.
Source: Company, DBS Bank
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Appendix 1: A look at Company's listed history – what drives its share price?
Chart A1: Summary of significant events driving ThaiBev’s share price
Legend A. Post-IPO in 2006, share price trades range bound due to muted growth. Outperformed peers heading into GFC till October 2008 given defensive profile (strong cashflow, >5% yield). Bottomed in March 2009, but recovery lagged peers with defensive profile. Lack of widespread interest given slow growth profile. Acquired Thai consumer companies (Oishi, Serm Suk), but stock price has failed to perform.
B. Acquired stake in FNN in July 2012; with interest on counter up on surprise factor. Strong EPS growth on stocking up prior to excise duty increase, corporate tax rate cuts. Share price up on clearer signs of FNN taken private by TCC/ ThaiBev. Surged to high on cash distribution, helping to deleverage ThaiBev.
C. Uncertainties on drivers post FNN acquisition, writ of summons by MBL partner, surprise excise duty increase in November 2013 (just one year following from August 2012 increase), political uncertainty, effects of corporate tax cuts wears off.
D. Resilient results despite excise hikes. Signs of limited impact from political uncertainty, coup, expectations of corporate restructuring on FNN.
E. In absolute terms, share price was flat but remained resilient vs peers. Uncertainty on corporate restructuring angle (dilutive) and expected excise duty (based on alternate year timeline), extent of impact from beer relaunch.
F. Success of beer brand relaunch, with strong gains in beer market share seen and beer operations posting a strong turnaround.
G. Correction post strong share price performance, and concerns of competitive reaction on beer, coupled with impact on consumption from mourning period.
E (Aug 09) – Excise duties increase (Dates)
#A (Oishi) – Acquisitions (selected) undertaken by ThaiBev
Source: ThomsonReuters, DBS Bank
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Chart A2: ThaiBev’s share price vs EPS Share price tracks 12- month forward EPS forecasts.
Re-rating from 2012, driven by EPS growth expected from margin expansion after excise tax increase, coupled with acquisition of stake in FNN.
Source: ThomsonReuters, DBS
Chart A3: Further re-rating of share price to be driven by segmental profits – increased beer contribution, NAB turnaround
Source: ThomsonReuters, Company, DBS Bank estimates
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Leverage & Asset Turnover (x) Balance Sheet: Gearing has improved since acquisition of FNN stake. The group’s net gearing has improved significantly, and is projected to further reduce to 0.22x (by end-FY17F) from the high of 1.2x immediately following its 28.5% stake acquisition in FNN. Going forward, its healthy balance sheet will put it in a good position for inorganic growth opportunities within the region.
Share Price Drivers: Changes in excise taxes. More than 50% of the group’s revenue goes into excise duties. A change in excise tax would impact on Capital Expenditure the share price, and depending on whether the group is able to pass on the cost increases to consumers, its share price could be positively or negatively affected.
Corporate restructuring. There has been constant talk of the eventual consolidation of FNN as a subsidiary, coupled with a monetisation of its stake in Frasers Centrepoint Limited. In our view, these tie in with the group’s announced “Vision 2020” Strategic Roadmap, in which one of the targets is to increase NAB's revenue contribution to over 50%. ROE (%) Turnaround in NAB. We project NAB to continue in the current investment mode in the foreseeable future. However, in the event that NAB turns around faster than expected, it could provide a catalyst to share price, underlining management’s ability to create value for the group.
Key Risks: Prolonged slump in consumer sentiment. A prolonged slump in the Thai economy could impact consumption, and hence our forecasts. Vice-versa, a pick-up in economic activity could offer upside potential. Forward PE Band (x)
Political situation in Thailand. A change or deterioration of the uncertain political situation in Thailand could have an adverse impact on the broader economy and private consumption.
Further excise tax hikes. Further increases in excise duties without a commensurate increase in ASP.
Company Background ThaiBev is a leading beverage producer in Thailand, with business segments spanning across spirits, beer, non-alcoholic PB Band (x) beverages and food. Its key brands are Sangsom, Hong Thong and Chang. It has 28.5% associate stakes in both Singapore- listed Fraser & Neave Ltd (FNN) and Frasers Centrepoint Limited (FCL).
Source: Company, DBS Bank
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Key Assumptions FY Sep 2015A 2016A* 2017F 2018F 2019F
Sprits vol gwth (%) 1.20 (1.8) (0.2) 2.00 2.00 Spirits ASP gwth (%) 0.20 (1.8) 0.0 4.00 2.00 Beer vol gwth (%) 17.5 32.9 (3.1) 5.00 6.00 Beer ASP gwth (%) 4.20 3.30 3.00 4.00 3.00 Non-Alc Bev rev gwth (%) 4.50 7.50 5.00 5.00 5.00 *2016A based on 9-months (from Jan-Sep). Key assumptions growth rates are annualized. Segmental Breakdown Based on 9-month FY Sep 2015A 2016A* 2017F 2018F 2019F period, from January- September. Revenues (Btm) Spirits 105,991 76,649 102,033 108,237 112,609 Beer 43,112 44,397 59,067 64,501 70,422 Non-Alcoholic Bev. 16,488 13,290 18,606 19,536 20,513 Food 6,578 4,993 6,857 7,063 7,275 Others (120) (176) (236) (252) (266) Total 172,049 139,153 186,327 199,085 210,553 Operating profit (Btm) Spirits 25,191 18,081 24,488 25,977 27,026 Beer 1,290 3,060 5,021 6,450 7,746 Non-Alcoholic Bev. (3,461) (1,811) (1,675) (977) 205 Food 52.0 37.0 103 106 109 Others 120 16.0 16.0 16.0 16.0 Total 23,192 19,383 27,953 31,572 35,103 Operating profit Margins Spirits 23.8 23.6 24.0 24.0 24.0 Beer 3.0 6.9 8.5 10.0 11.0 Non-Alcoholic Bev. (21.0) (13.6) (9.0) (5.0) 1.0 Food 0.8 0.7 1.5 1.5 1.5 Others (100.0) (9.1) (6.8) (6.4) (6.0) Total 13.5 13.9 15.0 15.9 16.7
Income Statement (Btm) FY Sep 2015A 2016A 2017F 2018F 2019F
Revenue 172,049 139,153 186,327 199,085 210,553 Cost of Goods Sold (121,830) (97,591) (129,307) (136,455) (142,604) Gross Profit 50,219 41,562 57,020 62,629 67,949 Other Opng (Exp)/Inc (26,839) (22,130) (29,067) (31,057) (32,846) Operating Profit 23,380 19,433 27,953 31,572 35,103 Other Non Opg (Exp)/Inc 1,162 647 647 647 647 Associates & JV Inc 7,774 3,375 4,171 4,053 3,845 Net Interest (Exp)/Inc (1,344) (776) (1,013) (944) (745) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Recognition of one-off Pre-tax Profit 30,972 22,679 31,759 35,329 38,851 gains in the divestment of MBL by its associate, Tax (4,508) (3,643) (5,793) (6,568) (7,351) FNN. Minority Interest (0.3) (117) 0.0 0.0 0.0 Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 26,463 18,920 25,965 28,761 31,500 Net Profit before Except. 26,463 18,920 25,965 28,761 31,500 EBITDA 36,496 27,801 37,284 40,951 44,441 Growth Revenue Gth (%) 6.2 (19.1) 33.9 6.8 5.8 EBITDA Gth (%) 16.1 (23.8) 34.1 9.8 8.5 Opg Profit Gth (%) (0.3) (16.9) 43.8 12.9 11.2 Net Profit Gth (Pre-ex) (%) 22.0 (28.5) 37.2 10.8 9.5 Margins & Ratio Gross Margins (%) 29.2 29.9 30.6 31.5 32.3 Opg Profit Margin (%) 13.6 14.0 15.0 15.9 16.7 Net Profit Margin (%) 15.4 13.6 13.9 14.4 15.0 ROAE (%) 24.4 16.0 20.9 21.4 21.6 ROA (%) 15.0 10.2 13.6 14.5 15.3 ROCE (%) 12.3 9.6 13.0 14.2 15.2 Div Payout Ratio (%) 57.9 79.6 65.8 62.9 60.6 Net Interest Cover (x) 17.4 25.1 27.6 33.5 47.1 Source: Company, DBS Bank
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Quarterly / Interim Income Statement (Btm) FY Sep 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017
Revenue 55,175 45,450 38,528 46,829 50,348 Cost of Goods Sold (38,956) (31,761) (26,874) (32,531) (34,798) Gross Profit 16,219 13,689 11,654 14,297 15,550 Other Oper. (Exp)/Inc (6,863) (7,328) (7,939) (6,847) (8,125) Operating Profit 9,356 6,361 3,715 7,450 7,425 Other Non Opg (Exp)/Inc 143 201 303 126 235 Associates & JV Inc 1,115 692 1,568 1,813 532 Net Interest (Exp)/Inc (275) (229) (271) (257) (232) Exceptional Gain/(Loss) 0.0 31.4 (31.4) 18.4 12.2 Pre-tax Profit 10,340 7,056 5,283 9,150 7,972 Tax (1,745) (1,169) (729) (1,407) (1,394) Minority Interest (34.6) (81.8) (0.3) (28.1) (21.4) Net Profit 8,560 5,806 4,554 7,715 6,557 Net profit bef Except. 8,560 5,774 4,585 7,696 6,545 EBITDA 10,615 7,254 5,586 9,389 8,192
Growth Revenue Gth (%) 8.4 (17.6) (15.2) 21.5 7.5 EBITDA Gth (%) 41.2 (31.7) (23.0) 68.1 (12.7) Opg Profit Gth (%) 43.6 (32.0) (41.6) 100.6 (0.3) Net Profit Gth (Pre-ex) (%) 42.0 (32.5) (20.6) 67.9 (15.0) Margins Gross Margins (%) 29.4 30.1 30.2 30.5 30.9 Opg Profit Margins (%) 17.0 14.0 9.6 15.9 14.7 Net Profit Margins (%) 15.5 12.8 11.8 16.5 13.0
Balance Sheet (Btm) FY Sep 2015A 2016A 2017F 2018F 2019F
Net Fixed Assets 46,921 47,871 47,915 47,793 47,504 Invts in Associates & JVs 75,737 78,463 80,434 82,287 83,932 Other LT Assets 11,231 11,216 11,159 11,102 11,046 Cash & ST Invts 3,494 5,063 8,948 11,534 16,538 Inventory 35,204 38,145 37,609 39,713 41,516 Debtors 3,906 2,588 4,237 4,527 4,788 Other Current Assets 5,523 4,307 4,307 4,307 4,307 Total Assets 182,017 187,653 194,610 201,264 209,632
ST Debt 17,374 18,996 18,996 18,996 18,996 Creditor 4,851 4,532 3,522 3,719 3,887 Other Current Liab 10,865 9,290 13,367 14,142 14,925 LT Debt 24,883 25,089 20,089 15,089 10,089 Other LT Liabilities 4,778 6,033 6,033 6,033 6,033 Shareholder’s Equity 115,885 120,070 128,960 139,642 152,058 Minority Interests 3,380 3,642 3,642 3,642 3,642 Total Cap. & Liab. 182,017 187,653 194,610 201,264 209,632
Non-Cash Wkg. Capital 28,918 31,218 29,265 30,687 31,799 Net Cash/(Debt) (38,763) (39,022) (30,137) (22,552) (12,547) Higher inventory turn Debtors Turn (avg days) 8.0 8.5 6.7 8.0 8.1 due to 9-months Creditors Turn (avg days) 15.0 18.4 11.8 10.0 10.1 period for FY16, thus Inventory Turn (avg days) 109.0 143.6 110.8 107.1 107.6 having a distortion to Asset Turnover (x) 1.0 0.8 1.0 1.0 1.0 the turn figures. Current Ratio (x) 1.5 1.5 1.5 1.6 1.8 Quick Ratio (x) 0.2 0.2 0.4 0.4 0.6 Net Debt/Equity (X) 0.3 0.3 0.2 0.2 0.1 Net Debt/Equity ex MI (X) 0.3 0.3 0.2 0.2 0.1 Capex to Debt (%) 9.3 6.4 11.5 13.2 15.5 Z-Score (X) 7.3 6.8 7.4 7.9 8.5
Source: Company, DBS Bank
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Cash Flow Statement (Btm) FY Sep 2015A 2016A 2017F 2018F 2019F
Pre-Tax Profit 30,972 22,679 31,759 35,329 38,851 Dep. & Amort. 4,452 3,295 4,515 4,681 4,847 Tax Paid (5,003) (2,267) (1,716) (5,793) (6,568) Assoc. & JV Inc/(loss) (7,774) (3,375) (4,171) (4,053) (3,845) Chg in Wkg.Cap. (1,236) (1,750) (2,123) (2,197) (1,895) Other Operating CF 1,074 (92.4) 0.0 0.0 0.0 Net Operating CF 22,486 18,490 28,262 27,966 31,390 Capital Exp.(net) (3,946) (2,822) (4,500) (4,500) (4,500) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 2,276 2,356 2,200 2,200 2,200 Other Investing CF 1,552 20.0 0.0 0.0 0.0 Net Investing CF (118) (446) (2,300) (2,300) (2,300) Div Paid (15,378) (16,670) (17,075) (18,079) (19,084) Chg in Gross Debt (3,728) 2,009 (5,000) (5,000) (5,000) Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (1,378) (942) 0.0 0.0 0.0 Net Financing CF (20,484) (15,603) (22,075) (23,079) (24,084) Currency Adjustments (622) (870) 0.0 0.0 0.0 Chg in Cash 1,262 1,571 3,887 2,587 5,007 Opg CFPS (S cts) 3.84 3.28 4.92 4.89 5.39 Free CFPS (S cts) 3.00 2.54 3.85 3.80 4.36 Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank Analyst: Andy SIM CFA Alfie YEO
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DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends
Completed Date: 29 Jun 2017 08:07:50 (SGT) Dissemination Date: 29 Jun 2017 10:23:40 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
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DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates have proprietary positions in Thai Beverage Public Company, F & N, recommended in this report as of 31 May 2017.
2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
Compensation for investment banking services: 3. DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from F & N as of 31 May 2017.
4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for F & N in the past 12 months, as of 31 May 2017.
5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced: 6. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
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Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at [email protected].
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Wong Ming Tek, Executive Director, ADBSR
Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.
United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.
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Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.
United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.
Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: [email protected] Company Regn. No. 196800306E
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