ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> has received a no-objection notice from <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">SGX (SGX SP)</a> for its plan to revive its intention to spin-off its brewery assets, predominantly in Thailand and Vietnam, raising US$2.0- US$2.5bn and potentially valuing the company at over US$10.0bn. We see the IPO of its BeerCo as a major catalyst for <a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> share price.
The spin-off will help the company realize the value of its brewery assets, where the implied valuation current sits at only US$5.5bn. This should be a positive trigger for the <a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> share price.  
A beer-drinking recovery is underway with anecdotal evidence and channel checks suggesting that there is a pick up in beer demand in both Thailand and in Vietnam. This evidence comes from conversations with <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB),</a> which is a leader in both glass bottling and aluminum cans.
Thailand is by nature a more resilient market given the fact that Thai people are not shy of drinking at home, whereas Vietnamese tend to enjoy a drink outside the home. Vietnam has seen very little impact from COVID-19, after strict lockdowns last year, which suggest a strong rebound in 2021. A pick-up in tourism is a further potential major catalyst for Thailand.
We have updated our sum of the parts analysis on <a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> and find that there is at least a 10% upside from our current target price should the IPO of the BeerCo go ahead as planned. Even under our most conservative assumptions, we see more than +30% upside.

Thai Beverage (THBEV SP) has received a no-objection notice from SGX (SGX SP) for its plan to revive its intention to spin-off its brewery assets, predominantly in Thailand and Vietnam, raising US$2.0- US$2.5bn and potentially valuing the company at over US$10.0bn. We see the IPO of its BeerCo as a major catalyst for Thai Beverage (THBEV SP) share price.
The spin-off will help the company realize the value of its brewery assets, where the implied valuation current sits at only US$5.5bn. This should be a positive trigger for the Thai Beverage (THBEV SP) share price.  
A beer-drinking recovery is underway with anecdotal evidence and channel checks suggesting that there is a pick up in beer demand in both Thailand and in Vietnam. This evidence comes from conversations with Berli Jucker (BJC TB), which is a leader in both glass bottling and aluminum cans.
Thailand is by nature a more resilient market given the fact that Thai people are not shy of drinking at home, whereas Vietnamese tend to enjoy a drink outside the home. Vietnam has seen very little impact from COVID-19, after strict lockdowns last year, which suggest a strong rebound in 2021. A pick-up in tourism is a further potential major catalyst for Thailand.
We have updated our sum of the parts analysis on Thai Beverage (THBEV SP) and find that there is at least a 10% upside from our current target price should the IPO of the BeerCo go ahead as planned. Even under our most conservative assumptions, we see more than +30% upside. 

Thai Beverage (THBEV SP) - Beer Aids Recovery

Alpha-Centric ESG Research

Kyle Rudden

At US$2 billion give-or-take, ThaiBev's float of 20% of its regional beer business ("BeerCo") will be the largest IPO on the Singapore Exchange in nearly a decade – that much we have all heard – but the deal will also raise the average ESG rating of SGX's listed issuers.I'm not sure what that average ESG rating is exactly, but it's definitely going up.Putting a brewery under the ESG microscope usually doesn't end well. For one thing, beer's carbon footprint is substantial, not to mention the issue of water consumption. Then, there are those two elephants in the room – alcohol, and socially-responsible investing.Somehow, despite all that, BeerCo looks relatively good under the ESG microscope.To be clear, BeerCo faces a few Social-pillar issues. Minor issues, such as the two highest per-capita alcohol consumption rates in Southeast Asia, and that whole Fifth Precept thing with Thailand's de facto religion. Plus, a host of laws to curb consumption and all of its socio-economic ills.An important distinction, however, is that those negative aspects of BeerCo's ESG story are mostly  circumstantial – i.e., external and beyond management control – whilst positive elements can be traced back to proactive Corporate Social Responsibility (CSR) policies and actions.It's not perfect, but by all indications thus far, BeerCo will rank among the world's more sustainable brewery stocks, even outperforming some of the sector's big-name "sustainability leaders."

At US$2 billion give-or-take, ThaiBev's float of 20% of its regional beer business ("BeerCo") will be the largest IPO on the Singapore Exchange in nearly a decade – that much we have all heard – but the deal will also raise the average ESG rating of SGX's listed issuers.I'm not sure what that average ESG rating is exactly, but it's definitely going up.Putting a brewery under the ESG microscope usually doesn't end well. For one thing, beer's carbon footprint is substantial, not to mention the issue of water consumption. Then, there are those two elephants in the room – alcohol, and socially-responsible investing.Somehow, despite all that, BeerCo looks relatively good under the ESG microscope.To be clear, BeerCo faces a few Social-pillar issues. Minor issues, such as the two highest per-capita alcohol consumption rates in Southeast Asia, and that whole Fifth Precept thing with Thailand's de facto religion. Plus, a host of laws to curb consumption and all of its socio-economic ills.An important distinction, however, is that those negative aspects of BeerCo's ESG story are mostly  circumstantial – i.e., external and beyond management control – whilst positive elements can be traced back to proactive Corporate Social Responsibility (CSR) policies and actions.It's not perfect, but by all indications thus far, BeerCo will rank among the world's more sustainable brewery stocks, even outperforming some of the sector's big-name "sustainability leaders."

ThaiBev BeerCo ESG Analysis: Among the World's More Sustainable Brewers Despite Social-Pillar Issues

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Equity Bottom-Up

The recent outbreak in Thailand may force the Thai government to initiate a nightlife entertainment ban and in-restaurant dining, two of the key critical avenues for alcoholic beverage sales for <a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> . Although it is still uncertain on the timing and duration, it is a big ask to keep the stock in the portfolio for the time being. 
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With fewer revenue contributions from alcoholic beverages, the company's EBITDA can easily go down by 10-20% again although it is unclear when the Thai government will initiate the night entertainment and in-restaurant ban. Investors should take the profit and stay out of Thai Beverage stock until there is clarity. 
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The recent outbreak in Thailand may force the Thai government to initiate a nightlife entertainment ban and in-restaurant dining, two of the key critical avenues for alcoholic beverage sales for Thai Beverage (THBEV SP) . Although it is still uncertain on the timing and duration, it is a big ask to keep the stock in the portfolio for the time being. 

With fewer revenue contributions from alcoholic beverages, the company's EBITDA can easily go down by 10-20% again although it is unclear when the Thai government will initiate the night entertainment and in-restaurant ban. Investors should take the profit and stay out of Thai Beverage stock until there is clarity. 


Thai Beverage (Thbev): Imminent Risk Ahead

<a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> booked some relatively resilient numbers for FY09/2020 with total revenues only down by -5.2% to THB253,481m, EBITDA up by +3.2%, with a net profit from normal operations up by +10.1% for FY09/2020. 4Q20 EBITDA increase by 31% YoY to Bt11.5bn. Sales of spirits grew by +19.2% QoQ in 4Q2020 versus 3Q2020 and beer sales grew by +22.8% QoQ. 
The spirits business in 2020 was especially resilient, even with a temporary ban on alcohol sales in Thailand as part of lockdown measures.
The beer business was impacted by lockdowns to some extent but Vietnam was hit more than Thailand which registered flat sales. The recovery in the beer business will be the key to the 2020 recovery.
The company's non-alcoholic beverages division saw a decent turnaround but the food division continued to face pressure from declining sales due to restrictions on eating out but the environment is improving. 
<a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> reiterated that in March 2020 it had exercised an internal restructuring of its beer business to generate more value and business growth opportunities, as well as improving operating efficiencies. This points the way to a spin-off at a future date.
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The company stated that the financial position remains solid as of October 2020 but it has entered into a bridging loan to provide it with the financial flexibility to potentially refinance its existing bond due in March 2021.  This represents a short-term overhang until an alternative becomes clear and could lead to higher finance costs in 1Q2021. 
Valuations look attractive with <a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> currently trading on 16.8x FY21E PER, in line with its historical average but it trades on an FY21E  EV/EBITDA of 12.4x, which looks cheap compared to its 3-year average forward EV/EBITDA and peer group comparisons.
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Thai Beverage (THBEV SP) booked some relatively resilient numbers for FY09/2020 with total revenues only down by -5.2% to THB253,481m, EBITDA up by +3.2%, with a net profit from normal operations up by +10.1% for FY09/2020. 4Q20 EBITDA increase by 31% YoY to Bt11.5bn. Sales of spirits grew by +19.2% QoQ in 4Q2020 versus 3Q2020 and beer sales grew by +22.8% QoQ. 
The spirits business in 2020 was especially resilient, even with a temporary ban on alcohol sales in Thailand as part of lockdown measures.
The beer business was impacted by lockdowns to some extent but Vietnam was hit more than Thailand which registered flat sales. The recovery in the beer business will be the key to the 2020 recovery.
The company's non-alcoholic beverages division saw a decent turnaround but the food division continued to face pressure from declining sales due to restrictions on eating out but the environment is improving. 
Thai Beverage (THBEV SP) reiterated that in March 2020 it had exercised an internal restructuring of its beer business to generate more value and business growth opportunities, as well as improving operating efficiencies. This points the way to a spin-off at a future date.

The company stated that the financial position remains solid as of October 2020 but it has entered into a bridging loan to provide it with the financial flexibility to potentially refinance its existing bond due in March 2021.  This represents a short-term overhang until an alternative becomes clear and could lead to higher finance costs in 1Q2021. 
Valuations look attractive with Thai Beverage (THBEV SP) currently trading on 16.8x FY21E PER, in line with its historical average but it trades on an FY21E  EV/EBITDA of 12.4x, which looks cheap compared to its 3-year average forward EV/EBITDA and peer group comparisons.







Thai Beverage (THBEV SP) - A Beer Fuelled Future

Thematic (Sector/Industry)

Lockdown, social distancing, and no public gathering have caused the alcohol beverage companies in ASEAN to be under enormous pressure to generate earnings, and some governments' plan to ban alcohol sales does not help to alleviate the burden either. 
<a href="https://www.smartkarma.com/entities/heineken-malaysia-bhd" target="_blank" data-smartkarma-citation="entities:12647:1" rel="noopener">Heineken Malaysia (HEIM MK)</a> and <a href="https://www.smartkarma.com/entities/carlsberg-brewery-malaysia-bhd" target="_blank" data-smartkarma-citation="entities:5389:1" rel="noopener">Carlsberg Brewery Malaysia (CAB MK)</a> will continue to experience difficulty as the pandemic continues to spring up and the proposal to ban alcohol will also curb revenue growth.
<a href="https://www.smartkarma.com/entities/multi-bintang-indonesia-pt" target="_blank" data-smartkarma-citation="entities:11651:1" rel="noopener">Multi Bintang Indonesia (MLBI IJ)</a> and <a href="https://www.smartkarma.com/entities/delta-djakarta-tbk-pt" target="_blank" data-smartkarma-citation="entities:5585:1" rel="noopener">Delta Djakarta (DLTA IJ) </a>may face a similar fate with the Malaysian counterparts but the latter has an 11% dividend yield which may make appealing to some investors and it is also owned by the Jakarta Regional Government. The winner is <a href="https://www.smartkarma.com/entities/thai-beverage-pcl" target="_blank" data-smartkarma-citation="entities:3656:1" rel="noopener">Thai Beverage (THBEV SP)</a> as Thailand's pandemic is under control and they are about to receive an influx of Chinese tourists again.

Lockdown, social distancing, and no public gathering have caused the alcohol beverage companies in ASEAN to be under enormous pressure to generate earnings, and some governments' plan to ban alcohol sales does not help to alleviate the burden either. 
Heineken Malaysia (HEIM MK) and Carlsberg Brewery Malaysia (CAB MK) will continue to experience difficulty as the pandemic continues to spring up and the proposal to ban alcohol will also curb revenue growth.
Multi Bintang Indonesia (MLBI IJ) and Delta Djakarta (DLTA IJ) may face a similar fate with the Malaysian counterparts but the latter has an 11% dividend yield which may make appealing to some investors and it is also owned by the Jakarta Regional Government. The winner is Thai Beverage (THBEV SP) as Thailand's pandemic is under control and they are about to receive an influx of Chinese tourists again. 

CrossASEAN: Alcoholic Beverage - Where to Drink?

Malaysia

Carlsberg Brewery Malaysia Berhad manufactures beer, stout, shandy, and nonalcoholic beverages for distribution in the home market and for export.

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Carlsberg Brewery Malaysia (CAB MK)

Thai Beverage (THBEV SP) - Beer Aids Recovery

Thai Beverage (THBEV SP) has revived its intention to spin-off its brewery assets, predominantly in Thailand and Vietnam, potentially valuing the...

Angus Mackintosh

Thai Beverage (Thbev): Imminent Risk Ahead

Less revenue from alcoholic drinks, EBITDA to go down again though unclear when the government will initiate the nightlife ban. Investors should...

Henry Soediarko

Thai Beverage (THBEV SP) - A Beer Fuelled Future

Thai Beverage continues to be one of our top ASEAN recovery plays, with the potential for a spin-off of its beer business further down the line

Angus Mackintosh

CrossASEAN: Alcoholic Beverage - Where to Drink?

The pandemic has forced governments to implement lockdown/social distancing that has brought many difficulties for alcohol beverage companies in...

Henry Soediarko

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Thai Beverage (THBEV SP) - Beer Aids Recovery

Thai Beverage (THBEV SP) has revived its intention to spin-off its brewery assets, predominantly in Thailand and Vietnam, potentially valuing the...

Angus Mackintosh

ThaiBev BeerCo ESG Analysis: Among the World's More Sustainable Brewers Despite Social-Pillar Issues

Putting a brewery under the ESG microscope usually doesn’t end well. ThaiBev's BeerCo is an exception, ranking among the world's more sustainable...

Kyle Rudden

Thai Beverage (Thbev): Imminent Risk Ahead

Less revenue from alcoholic drinks, EBITDA to go down again though unclear when the government will initiate the nightlife ban. Investors should...

Henry Soediarko

Thai Beverage (THBEV SP) - A Beer Fuelled Future

Thai Beverage continues to be one of our top ASEAN recovery plays, with the potential for a spin-off of its beer business further down the line

Angus Mackintosh

CrossASEAN: Alcoholic Beverage - Where to Drink?

The pandemic has forced governments to implement lockdown/social distancing that has brought many difficulties for alcohol beverage companies in...

Henry Soediarko