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Thai Beverage: Budweiser's revamped IPO could add fizz to Asian beer

  • The renewed IPO has a much higher chance of success than the original offering

  • The prospective APAC listing could raise valuation multiples for Asian brewers

  • It would also pave the way for acquisitions of Asian brewers

Thai Beverage: Budweiser's revamped IPO could add fizz to Asian beer
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
13 September 2019
Published by

In 1954, Australia’s Prime Minister Bob Hawke broke a world record for gulping two and half pints of beer in 11 seconds, but beer consumption in Australia is much more muted these days, halving on a per capita basis over the past 30 years. In fact, 2019 has marked the first year in which wine consumption has outstripped beer consumption down under. 

Leaner and meaner IPO

Yesterday, Budweiser APAC, ABInBev’s Asian unit, announced plans for a revamped IPO. This would raise the spirits of Asian beer investors. The original plan for a US$10bn listing was shelved after a lukewarm response in July.  The  new offering (US$5bn) has been shorn of its Australian unit (Carlton & United Breweries), which has been sold for US$11.3bn to Asahi. 

Better prospects 

The renewed IPO has a much higher chance of success than the original offering, for two reasons (we were wary of its prospects). 

First, the leaner and meaner IPO would be emphatically an emerging markets story. Previously, over one-fifth was from the stagnant markets of Australia and Japan. Now, Budweiser APAC would be driven by China, India, South Korea, Vietnam and other bubbly markets. 

Second, it slashes the debt mountain that the parent (ABInBev or ABI BB) is facing, by over 10%. The Australian disposal cuts ABI BB’s net debt/EBITDA, from 4.7x to 4.2x. 

Valuation boost

The prospective listing could raise valuation multiples for Asian brewers. Our estimates suggest a forward EV/EBITDA multiple of 24x. If that is the case, it would mean that Asian brewers, 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 would 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 dominated and highly exposed to the burgeoning markets of Thailand and Vietnam. THBEV SP is trading at a 15% discount (at least) to Budweiser APAC’s projected IPO valuation.

There may be more fizz for THBEV SP in 2019, after rising 33% ytd. We see 21% upside.