+ Resilient spirits divisions. Volume growth in spirits was stable, improving 0.3% YoY despite the pandemic in Thailand. Spirits are consumed off-trade or in homes and less affected by closures of entertainment or retail channel. In comparison beer volumes in Thailand fell 6.5% YoY.
+ Aggressive cost cuts especially in beer division. The major driver to earnings growth has been aggressive cost cuts. Total administration and distribution cost for the group contracted 10.6% or THB1.6bn. Bulk of the operating cost cuts came from beer division, where slashed a massive THB1.3bn of cost (or down 26.5% YoY.
– Sabeco still suffering. Another weak quarter with volumes down 11.6% YoY. A combination of Decree 100, a typhoon in October and late Tet (10 days later from a year ago).
– Plunge in Frasers Property earnings. 1Q21 PATMI contribution from associates, Frasers Property and F&N, was down 58% YoY to THB433mn. There was limited disclosure but lower property development income and weakness in hospitality and retail operations.
The re-occurrence of COVID-19 in Thailand in December renewed restrictions and lockdowns on gatherings and entertainment activities. On-trade channels were more affected as reflected by soft beer consumption. We expect a gradual recovery in alcohol consumption especially from pandemic and alcohol ban affected FY20. For Sabeco, volumes should improve as the impact from Decree 100 wanes off.
With regards to Beerco listing, FY9/20 PATMI was S$198mn. If we assume 30x PE, similar to global peers, the market cap will be S$5.9bn. Assuming 20% stake is sold, interest savings (after tax) is around S$33mn (THB750mn). This is around 3% of our FY21e PATMI. But the 20% dilution will shave around THB250mn off PATMI.
Another development is the 37 to 100 rights shares for issue by Frasers Property at $1.18 per shares. ThaiBev owns 824.847mn shares (or 28.12%) of Frasers Property. The company has given an irrevocable undertaking to subscribe for their allotted 305.193mn shares. Therefore, ThaiBev will fork out $360mn for the rights.