Japan & Vietnam: Sabeco expensive at its current valuation - Asahi

Saigon Beer Alcohol Beverage Corp. is expensive at its current valuation, according to Asahi Group Holdings Ltd., a potential bidder for Vietnam’s biggest brewery whose market capitalization has soared to $7.5 billion after the government put its stake on the block, Bloomberg reported on September 21.

“The valuation is very high. Sabeco’s stock hasn’t gone down at all,” Asahi President and Chief Operating Officer Akiyoshi Koji said in an interview on September 21, declining to comment on its interest acquiring a stake of the Vietnamese company. “Compared with our deals in Europe, the multiples for a Sabeco deal would be very high.”

The Japanese brewer was among about a half dozen foreign companies that registered last year to bid for a stake in Sabeco in what would be Vietnam’s biggest offering. Vietnam, whose Communist government has embarked on a plan to divest from some of the country’s biggest companies, is an attractive investment destination for Japan Inc. with its young demographics and growing middle class.

Shares of Sabeco, as Saigon Beer Alcohol is called, have doubled since it started trading in December. The stock fell 2.9 percent to 265,000 dong in Ho Chi Minh City on September 21.

The shares currently trade at about 35 times 12-month estimated earnings, compared with 16 times for Asahi, 21 times for Carlsberg A/S and 20 times for Heineken NV. Asahi paid about 14 times the earnings before interest tax depreciation and amortization for its acquisitions in Europe in the past year, Koji said.

For potential investments, Koji said Asahi looks for targets that meet four key criteria: high profitability, strong brand value, manufacturing efficiency and advanced brewing technology, and skilled top management.

“If the company isn’t competitive enough or doesn’t have a strong global premium brand, we won’t invest in it," Koji said.

Sabeco posted revenue of about 31 trillion dong ($1.4 billion) in 2016, while Carlsberg had revenue of almost 63 billion kroner ($10 billion) in the same period.

Vietnam said this month it plans to sell a 54 percent holding in Sabeco, without providing a time frame. The bidding, which Anheuser-Busch InBev NV and Heineken NV also registered to participate in, will likely be fierce as beer sales continue to be either flat or declining in Japan, Western Europe and North America, according to a report last month from Bloomberg Intelligence.

Strong demand for Sabeco’s Saigon Beer and 333 Beer brands have helped it capture about 40 percent of Vietnam’s $6.5 billion lager market, according to Bloomberg Intelligence.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .