ThaiBev

ThaiBev: CS initiates and expects spirits to continue being the largest earnings contributor to ThaiBev, even if it ends up with all the group’s shares in FNN. CS thinks that spirits earnings can grow near term as 1) the business had been hurt by consecutive tax increases, which should not recur, 2) spirits sales are inversely correlated to TH GDP (THBEV a strong defensive investment, given the currently weak outlook of Thailand). CS highlights that while beer sales volumes continue to slip, gross profits have held up. The termination of the arrangement with Pepsi has hurt sales of non-alcoholic drinks, but with the integration of FNN, THBEV can become a meaningful regional drinks company; providing the much sought long-term growth. The on-going unrest can impact THBEV's sales in the near term, and can hurt its quarterly numbers. Beyond that, CS believes THBEV should be able to recoup some of the volume and margin losses in spirits sales, stem beer losses and improve non-alcoholic segment sales. Risks include: (1) increased competition in non-alcoholic drinks (lower margins), (2) further tax hikes and (3) sustained political uncertainty in Thailand. CS has an O/PF rating with TP of $0.54