ThaiBev’s Q3 FY2023 Earnings: 7 Reasons to Buy Now

August 11, 2023

One of the companies that is expected to benefit from the global reopening is Thai Beverage PCL (SGX: Y92), better known as ThaiBev.

Recently, the Group has just released its Q3 FY2023 earnings report, which paints a mixed picture.

To assist investors in gaining clarity, we have distilled the analysis into seven key highlights presented here.

1. Vietnam’s weakness is a challenge but not a dead end

The Q3 FY2023 earnings report reveals some challenges, especially a decline in revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) by 6% and 24% year-on-year (yoy) in the beer segment due to weakness from the Vietnam subsidiary, SABECO.

The main brand owned by Sabeco is Saigon Beer.

Despite the weakness, Sabeco’s management predicts a consumption recovery flowing through in early 2024 and easing cost pressures in FY2024, indicating a potential medium-term recovery for the beer segment.

2. Thailand’s growth fueled by tourism recovery

In contrast to the Vietnamese beer segment’s performance, ThaiBev’s presence in Thailand has shown remarkable resilience.

The strength in Thailand’s economy and tourism recovery has fueled growth across key segments.

The spirits segment’s revenue grew by 12% yoy, driven by the 10% yoy volume growth, price adjustments, and sales mix towards higher-priced spirits.

3. Positive growth in the international market

Aside from that, ThaiBev also reported positive performance in the international market.

The Group’s international business, including the Myanmar market, reported robust performances with increased sales revenue and EBITDA.

4. Strong leadership in spirits and beverages

ThaiBev stands out for its strong market leadership, particularly in Thailand and Vietnam, with substantial growth potential.

The spirits business alone grew 12% yoy to THB 29 billion.

Non-alcoholic beverages also showcased robust growth, marking 16% yoy.

5. Near-term challenges could be a downside risk to earnings

Short-term challenges include the beer segment’s lower margins due to increased costs.

This is seen as a temporary setback to strengthen the segment in the future.

Aside from that, slower-than-expected pickup in consumption, tourism activities, and increased competition could pose challenges.

Investors should also be mindful of potential risks, including political uncertainties in Thailand and higher-than-expected selling, general & administrative (SG&A) spending.

6. Positive ESG impact

ThaiBev has maintained its commitment to responsible practices, which may resonate with modern investors focused on sustainability.

The company focuses on developing sustainability across its value chain by applying new technology and collaborating with business partners.

It also promotes corporate social responsibility through a wide array of programs in education, public health, sports, arts, culture, and community development across Thailand.

On the governance aspect, ThaiBev adheres to a strict Code of Business Conduct, ensuring transparent and auditable management systems.

7. Valuation and attractive upside potential

Despite immediate challenges, ThaiBev’s valuation remains appealing.

With an average target price of SG$0.87, this provides an upside of 51.3% for investors.

ThaiBev’s resilience, recovery prospects, and valuation make it a compelling investment

While ThaiBev’s Q3 FY2023 earnings report reveals some mixed performances, the company’s resilience in Thailand, prospects for recovery in Vietnam, and attractive valuation present a strong case for investment.

With robust market leadership and a positive outlook for key segments, ThaiBev offers a tantalising opportunity for investors to capitalise on Thailand’s economic recovery and the resurgence of tourism in the region.

Investors are encouraged to keep a watchful eye on the evolving landscape, particularly in Vietnam, and to consult financial professionals to ensure ThaiBev aligns with their individual investment strategies and risk tolerance.

The long-term potential and underlying robustness make Thai Beverage’s stock a compelling buy, signalling a promising journey ahead for investors.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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