Is Thai Beverage headed for S$0.95 a share?

• Thai Beverage PCL (SGX: Y92) share price hit S$0.79 this week - a two-month high
• This came after it received a conditional eligibility-to-list letter for the proposed spin-off listing of its brewery unit BeerCo Limited
• UOB and Maybank analysts recently rated the stock a ‘buy’ while giving a price target of S$0.95, which represents a 22% upside
• Buy and sell ThaiBev shares with a live or demo IG account

UOB, Maybank give ThaiBev price target of S$0.95

UOB has named Thai Beverage as one of its ‘Stock Alpha Picks’ for the month of April 2021.

The manufacturer of Chang Beer was given a ‘buy’ rating alongside a 12-month price target of S$0.95 a share by analyst Lucas Teng.

The price estimate represents a 21.8% upside from the stock’s closing price of S$0.78 on Thursday (08 April 2021).

Teng cited ThaiBev’s ‘resilient’ 1QFY2021 earnings as the basis for his investment thesis, stating that net profit for the quarter of 8.5 billion Thai baht represented a 0.5% year-on-year increase.

He wrote in a 06 April 2021 note that this profitability was ‘impressive’, when comparing to the same period a year ago, just before Covid-19 had struck.

Continued cost mitigation efforts, he added, also continue to be in place. This led to the selling, general and administrative expense-to-revenue ratio falling to 13.3% in 1QFY2021, which is a drop of 1.5 percentage points year-on-year.

On the back of this, UOB estimates that EBITDA margins will improve by three percentage points year-on-year to 20.1%.

Last week, Maybank also initiated coverage on the stock with a ‘buy’ recommendation and higher target price of S$0.95, on predictions that ThaiBev’s spirits and beer businesses will recover.

Read also: Top 5 Singapore stocks to watch in April 2021

BeerCo listing will ‘help unlock shareholder value’

UOB’s Teng also noted the potential listing of ThaiBev’s brewery unit BeerCo. He said that while there is no certainty that the proposed spin-off could happen, he is of the view that ‘it will help unlock shareholder value, given the growth potential in the Vietnam beer market’.

ThaiBev said last Friday (02 April) that the SGX-ST had issued a conditional eligibility-to-list (ETL) letter for the proposed spin-off listing of its brewery unit BeerCo Limited on 01 April 2021.

‘The ETL letter is not to be taken as an indication of the merits of the proposed spin-off listing, BeerCo Limited or its subsidiaries, or the shares of BeerCo Limited,’ the company stated.

The receipt of the ETL letter is one of the requirements which has to be met in order for ThaiBev to proceed with the potential listing.

ThaiBev shares rose nearly 4% on Monday morning following the announcement.

In light of the aforementioned points, Teng concluded that the stock’s valuations are ‘still attractive’, as it currently trades at 17.7 times of FY2021’s price-to-earnings (P/E) ratio. This is roughly one standard deviation below its five-year mean P/E of 20.4 times.

On average, ThaiBev has a consensus rating of ‘outperform’ and price target of S$0.86, according to the latest SGX StockFacts data.

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