$$$ KPO and CZM $$$: ThaiBev

Sunday, January 14, 2018


We made our 1st purchase for the year! We purchased 6,000 units of ThaiBev (Thai Beverage) last week (9th January 2018) at $0.92. At the point of writing this article, the price is currently at $0.935. Yay!

The latest news on the acquisition of Vietnam’s top brewer Sabeco sent its share price falling from a high of $0.975 on 15th December 2017 to as low as $0.90 on 26th December 2017 which is totally understandable. It is an expensive price to pay for an effective stake of only 26.3%. Vietnam Beverage Co Ltd won the bid for 53.58% of Sabeco which will be funded 100% by ThaiBev although they only own 49% of Vietnam Beverage indirectly through Beer Co. (53.58% x 49% ~ 26.3%). The method of financing has yet to be confirmed but it will definitely increase its liability significantly.

Honestly, I think this is a bad deal too but this is probably the only/best way for ThaiBev to proceed with the acquisition. Sabeco is sort of "backed" by the government (The government had set a minimum sale price of 320,000 dong or $14.1 per share for Sabeco, formally known as Saigon Beer Alcohol Beverage Corp - Thai beer magnate extends SE Asia push with $4.8 billion Sabeco deal) and there is no way it will be owned externally with foreign ownership capped at 49%, hence the weird structuring.

If we were to look at the bigger picture, the acquisition is in line with its "Vision 2020" strategic roadmap to create greater value and deliver more sustainable returns to shareholders. This is extracted from ThaiBev's 2017 Annual ReportTo support and sustain ThaiBev’s growth, we plan to diversify our revenue streams, increasing revenue contribution from non-alcoholic beverages and the sale of products outside of Thailand.

Based on the 2017 Annual Report, ThaiBev is trading at a PE of 16.36 at $0.935 - EPS of 1.37 Thai Baht ~ 0.05716 SGD which is pretty reasonable. Its NAV is 5.13 Thai Baht ~ 0.214041803 SGD and this translate to a PB of 4.37 (not so relevant/important). I will not go too much into the numbers as the 2016 numbers are reported based on a 9 months period hence it is difficult to compare its year-on-year performance accurately. However, a rough estimate on the 2016 numbers (numbers / 3 x 4) seems to indicate that ThaiBev did better in 2017!

Screenshot from 4-traders
Out of the 708 companies listed in SGX, ThaiBev is ranked lucky 8th in terms of market capitalization (around $23 billion). It is so large that it owns 28.4% of Frasers Centrepoint Ltd, 28.5% of F&N and 79.7% of Oishi Group currently (Sabeco soon).

Screenshot from ThaiBev website
Most importantly, ThaiBev has a dividend policy of distributing more than 50% of net profits after deduction of all specified reserve, subject to investments plan and as the Board of Directors deems appropriate and they have been meeting it very comfortably (dividend payout ratio between 50% to 80%) for the last 10 years with increasing dividends! People still need to drink during a financial crisis, maybe drink even more. lol.

We see the recent weakness in share price as an opportunity to accumulate some. Will the share price drop below $0.90? Maybe/maybe not. Will the share price be more than $0.92 by 2020? Most certainly! $2.020? Hahahahaha (laughing at my own foolishness).

Would you be interested in reading about our last purchase for the year of 2017? APAC Realty

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  1. Wah. Another similar holding.

    Fingers crossed that it doesn't go into a downtrend. The holdings we share always bleed one :(

    1. Hahahaha. What kind of correlation is this? That doesn't make sense!

    2. The KPOUN correlation (LOL, sounds "sophisticated" right?)

      First, Raffles Med. Second, QAF. Hope there's no 3rd (Thai Bev)

    3. Words from a researcher. Very cheem. Let's see how true is KPOUN at the end of 2020? lol.