Thailand: ThaiBev shares seen as one of top picks among Singapore-listed consumer stocks
CGS-CIMB Research says Thai Beverage is one of its top picks among Singapore-listed consumer stocks, given the kingdoms improving domestic beer consumption, The Edge Singapore reported on June14.
CGS-CIMB also favours ThaiBev due to the strength in the Thai baht and also its valuation gap to other Thai-listed peers.
We expect the share price to perform well when results deliver, says CGS-CIMB which is maintaining ThaiBev at buy.
In April, domestic beer consumption was up 21% y-o-y, reversing from the slow demand growth in March, according to Thailands Office of Industrial Economics.
Although the inclusion of Sabeco and exports could have distorted ThaiBevs y-o-y numbers, CGS-CIMB says - on a 7-month basis from Oct 2018 to April the kingdoms beer consumption has grown 9% y-o-y.
We believe ThaiBev will grow in tandem, given that it is the second-largest beer player in the market with an approximate 40% market share, says analyst Juliana Cai in a report published on June 13.
Meanwhile, Thailand retail sales were up 12% y-o-y in the last two quarters while farm income was stable.
We believe the economic stimulus package including state welfare cards to 14.5 million low-income earners and personal income tax deductions should help boost domestic spending, adds Cai.
In addition, about 85% of ThaiBevs PATMI is derived from Thailand, estimates Cai.
Year to date, the THB/USD has appreciated 4% while regional currencies stayed flattish.
Amid market uncertainties revolving around US-China trade tensions, we favour ThaiBev over other Singapore-listed consumer companies, given the strength of the THB compared to regional currencies, says Cai.
Based on CGS-CIMBs forecast, ThaiBev is trading at 21x FY19F P/E, which it thinks is undemanding.
Our SOP-derived target of 92 cents implies a forward P/E of 23x. This is still very reasonable when compared to other alcohol players that are trading at 32x and Thailand-listed consumer stocks, which are trading at an average of 26x, says Cai.
Shares in ThaiBev closed flat at 84 cents on June 14.
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