- The consumer is enduring a stagflationary environment of rising prices and diminishing spending capacity as incomes remain generally flat. Key strategies to engage consumers in such an environment include smaller, affordable packs, convenience through ready-to-drink spirits, new products such as protein beverages, and brand extensions into soda and mineral water.
- Free cash flow should improve after the major capex spend over the past two years in Cambodia and the dairy farm in Malaysia. The improved balance sheet provides flexibility in acquisitions. Forward purchases of raw materials are largely hedged for this financial year's requirements. There have been no significant purchases over the past four weeks as prices taper off.
- It remains a challenging environment. Consumer sentiment is delicate, with limited spending capacity. We maintain our BUY recommendation and target price of S$0.53. Valuations remain attractive at 10x FY26e with a dividend yield of around 5.5%. Margins will remain resilient due to lower priced raw materials purchased and disciplined operating costs. Beerco's spinoff remains an asset monetisation opportunity, as SE Asia, especially Vietnam, is a growing consumer market attractive to strategic investors.
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