+ Jump in spirit volumes. After a disappointing 4Q21, there was an 8.6% YoY jump in spirit volumes in 1Q22 to 206mn litres, or a 48% QoQ improvement. When measured over six months till Dec21, volumes are still down 4.5% YoY. Surprisingly, revenue growth in 1Q22 was much softer than volumes. We believe the weaker Myanmar Kyat pulled down spirits revenue. Volume growth in Thailand may also be driven by some front-loading of orders before the price increase introduced during the quarter.
– Margins headwinds. Rising margin pressure from raw materials and normalising of advertising and marketing costs will be the key challenge in FY22e. The beer division has managed to contain some of the margin pressure by raising prices by around 9%. Despite the aggressive rise in prices margins contracted.
We expect a recovery year in FY22e. Revenue is expected to rebound as lockdown measures are removed, entertainment outlets and borders re-open and economic conditions improve in Thailand and Vietnam. An added driver will be price increases from the spirits and beer divisions to mitigate the cost pressures.
Maintain ACCUMULATE with unchanged TP of S$0.765
Our target price stays at S$0.765, based on 18x FY22e earnings, its 5-year average.