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Thu, September 24, 2020 – 4:22 pm
Now is “happy hour” for shares of beer and spirits maker Thai Beverage Public Co (ThaiBev), as the stock price has fallen to trade below its standard deviation level of minus two, CGS said. CIMB.
The declining number of daily Covid-19 cases in the group’s main markets, Thailand and Vietnam, also bodes well for recovery in those countries.
So this is an opportune time to rack up stocks, the brokerage said in a note dated Wednesday, as it raised the beverage giant to “add” from “hold” and kept the price target at 70 Singapore cents.
Shares of ThaiBev were trading at 58.5 cents at 4:45 p.m. Thursday, down 0.5 cents or 0.9 percent.
Analyst Cezzane See noted that the stock price has fallen about 35 percent since the beginning of this year from its peak of 90.5 cents on January 2.
That means ThaiBev has underperformed Singapore’s Straits Times benchmark, which is down 23.7 percent so far this year.
The stock is also trading below its five-year standard deviation level minus two of approximately 15 times the price-to-earnings (P / E), and below 26 times P / E of its regional peers by 2021.
CGS-CIMB believes that the risk-reward ratio is now skewed upward for long-term investors.
ThaiBev’s share price is now closer to its 2018 low of 57.5 cents, when its alcohol sales volume in Thailand had fallen due to weaker discretionary purchasing power, a tax on funds for seniors in early 2018 and a rise in product prices after higher excise rates were implemented in late 2017.
“We believe that short-term conditions have improved for longer-term investors looking to review recovery plays and overcome political uncertainties in Thailand,” Ms See said.
As the number of new daily coronavirus cases continues to decline, beer and liquor volumes in Thailand and Vietnam may improve, he added.
In July, Thai alcohol sales volumes gradually recovered; sales of selected domestic Thai spirits increased 17.4 percent year-on-year and beer sales increased 26.5 percent.
However, in the same month, Vietnam’s industrial beer production fell, likely due to the country’s second wave of Covid-19 cases that began in July, in the view of CGS-CIMB.
ThaiBev may also see a boost from the Thai government’s upcoming stimulus measures, which may support the purchasing power of consumers in fiscal year 21.
CGS-CIMB raised its earnings per share estimates for fiscal 2020 by 4.8 percent due to higher revenues and better margins, although it kept them virtually unchanged for fiscal year 21-22.
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