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Thai Beverage: Budweiser's pricing shows Asia's beer boom is in full swing

    Nirgunan Tiruchelvam
    Nirgunan Tiruchelvam

    Head of Consumers Equity Research

    Tellimer Research
    24 September 2019
    Published by

    Investors have shown a vigorous level of confidence in Asia’s thirst for beer. Budweiser APAC’s second attempt at an IPO (which, at an estimated US$6.6bn, is the second largest of 2019, after Uber's) has proved much more successful than the first.

    On Monday, investors seem to have priced the issue at the midpoint of the valuation range, at 34x-38x PE, putting it broadly in line with the two main Chinese breweries listed in Hong Kong: China Resources (1109 HK) and Tsingtao (168 HK). GIC, Singapore's sovereign wealth fund, is reportedly a cornerstone investor with a US$1 billion position. It is priced at roughly 25% premium to the EV/EBITDA multiple of ASEAN brewers, such as Thai Bev and Tsingtao, suggesting there could be further valuation upside for these players.

    Rising multiples

    Our estimates suggest a forward EV/EBITDA multiple of 24x for Asian brewers. If that is the case, it would mean that companies such as Thai Beverage (THBEV SP), Sabeco (SAB VN) and San Miguel (SMC PM) are 14-22% undervalued. 

    Acquisitions may be in the offing  

    ABI BB’s CEO Carlos Brito has indicated that the Budweiser APAC listing could also pave the way for acquisitions of Asian brewers. It would provide ABI BB with Asian equity as currency for the deals. THBEV SP’s and SMC PM’s breweries could be acquisition targets. THBEV SP’s brands are highly exposed to the flourishing markets of Thailand and Vietnam. THBEV SP is at a 15% discount (at least) to Budweiser APAC’s projected IPO valuation.

    There may be more buzz for THBEV SP in 2019, after rising 31% ytd. At our TP of SGD1.10, we see 23% upside.