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Vietnam will add fizz to Thai Bev’s renewed beer IPO plans

  • We reiterate our Buy recommendation due to the renewed plans to spinoff the beer business

  • Vietnam and Thailand are seeing beer consumption explode with the reopening to tourism

  • The beer spinoff will be accretive to valuation

Vietnam will add fizz to Thai Bev’s renewed beer IPO plans
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
9 May 2022
Published by

We reiterate our Buy recommendation on Thai Beverage (THBEV SP) with an unchanged target price of SGD1.26, implying 83% upside.

We are bullish for the following reasons:

1) Spinning off its beer business

On 5 May, Thai Beverage announced that it is renewing plans to spinoff its beer business in an IPO. The entity would be called BeerCo. The IPO could raise US$700-800mn, with the listing taking place in July or August.

The beer listing could be accretive from a SOTP valuation basis.

THBEV: SOTP Valuation

2) Timing of the beer IPO

A heady brew of factors makes the timing of the beer IPO ideal. The beer segment is recording higher volumes than in the pre-pandemic era. Beer volumes in Thailand and Vietnam rose 10% and 27% yoy, respectively, in April.

The reopening of both countries to international tourism is likely to be a key driver. From this month, tourists can enter Thailand with proof of a Covid vaccine, and Vietnam has also opened its doors to tourism again.

Almost a third of the consumers of beer are tourists in both countries. And in addition to the return of tourism, bars are also reopening.

Vietnam - International tourist arrivals

3) High chance a restructuring would cut debt

Thai Bev has been under pressure from rating agencies to cut leverage. It financed its acquisition of Vietnam's Sabeco with US$-denominated debt financing.

We expect a value-enhancing restructuring, where TCC injects Fraser and Neave (FNN SP)’s F&B business into Thai Bev in exchange for divesting its associate stake in FNN SP.

4) THBEV SP is trading at a 14% discount to SAB VN's valuation

One-third of Thai Bev’s earnings growth will be driven by Sabeco, but investors would be better served by investing in the parent, in our view.

Thai Bev is trading at just 12.7x FY 23F EV/EBITDA, which is 16% below the Asian peer average.

On a historical basis, Thai Bev is at the bottom end of its 10-year PE and PB valuations.

THBEV: Price to Earnings

THBEV: Price to Book

THBEV: DCF calculation

THBEV: Income Statement (THB mn)

THBEV: Balance sheet (THB mn)

THBEV: Cashflow statement (THB mn)