Thursday, February 14, 2013

Thai Beverage

Thai Beverage: CIMB maintains O/p and increases TP to $0.70 from $0.60. Highlight that gainning control of F&N’s brands and extensive distribution network in SG, Msia, and Brunei could transform Thai Bev/TCC into a regional consumer name. The grouse that it was a single-country, low-growth beer/spirits company is now no longer valid. Synergies can show up via F&N’s entry into Thailand and Oishi’s overseas expansion. Valuations should also expand as growth accelerates. House have not factored in synergies yet though our FY12-14 EPS does rise by 1-8% to reflect lower Thai corporate tax rates; this lifts house SOTP. Catalysts for intact Outperform could come from a streamlining of its F&B business and earnings delivery, in house view. House anticipate some corporate restructuring by Mr Chaoren by way of depositing F&N’s F&B businesses in Thai Bev with TCC taking singular ownership of the property assets of F&N. A cleaner corporate structure should allow Thai Bev to reap the synergies of its F&B businesses. House suggest that Thai Bev could buy out F&N’s F&B business and fund this by selling back its 29% stake in F&N, to F&N. Thai Bev will then be a pure consumer company with no property exposure, while F&N will be left with just a property arm which suits TCC fine. If F&N chooses to buy back all of Thai Bev’s remaining stake, such a transaction could pare down Thai Bev’s net gearing (1.6x in 3Q12) to 1.1x.

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