Equity Analysis /
Thailand

Thai Beverage: AB InBev's IPO increases the fizz

    Nirgunan Tiruchelvam
    Nirgunan Tiruchelvam

    Head of Consumers Equity Research

    Tellimer Research
    3 July 2019
    Published by

    Anheuser-Busch InBev (ABI BB or AB InBev) is looking to raise US$9.8 billion in a listing of its Asian business in Hong Kong. The IPO would be for 1.6 billion shares of Budweiser Brewing Company APAC Ltd. It would be priced between HK$40 and HK$47, implying an estimated valuation range of 18x to 21x EV/EBITDA. Trading is scheduled for 19 July and is likely to be the largest IPO in 2019.

    The listing is a game changer for Asian brewers such as Thai Beverage (THBEV SP, Buy), Sabeco (SAB VN), and San Miguel (SMC PM). The prospective valuation suggests that THBEV SP is 15-23% undervalued. SAB VN is trading at 21x EV/EBITDA, according to Bloomberg consensus. Vietnam's growth prospects are stronger than any other Asian market, suggesting that SAB VN deserves a premium to other Asian markets. SMC PM could also receive a boost. Vietnam's thirsty consumers are projected to drive 6% yoy growth in beer consumption per capita in 2018-23, according to Passport.

    ABI BB plans to use the listing to acquire Asian brewers. ABI BB's CEO Carlos Brito has indicated that the listing is designed to pave way for Asian acquisitions. This strategy has been successful elsewhere, with ABI BB's Brazilian listing helped persuade Latin American brewers to sell to ABI BB over the past 15 years. 

    THBEV SP could be an acquisition target for ABI BB. THBEV SP is highly branded and has exposure to Thailand and Vietnam. Crucially, THBEV SP is trading at a discount to the projected IPO valuation. Our unchanged target price of SGD1.10 implies 25% upside for THBEV SP. Despite its 38% rise YTD, we think there is a lot of fizz left in the stock.