4 signs that ThaiBev is nailing it this time

ThaiBev's 6-year losing situation is about to be reversed.

According to CIMB, Thai Bev’s share price has remained largely flat since its listing in 2006. CIMB thinks this has had to do with its flat earnings. A growing and very profitable spirits business had been cancelled out by losses at its beer business.

Here's more from CIMB:

But today, we believe the situation is about to change, with multiple drivers in sight that could catalyse its stock:

1) Thai Bev’s desire to transform itself from an alcohol company into a leading beverage purveyor. It had made a series of acquisitions in the past three years to that end, beginning with Wrangyer, Oishi, then Serm Suk, and now F&N. We beieve its involvment with F&N will speed up its transformation, providing Thai Bev with a South-East Asian presence and new avenues for product collaboration with both F&N and Kirin.

2) A turnaround of its beer business, led by a new image-driven strategy vs. its previous product focus. We believe this will tackle the root of the problem, with the numbers already pointing to early success. EBITDA had been positive in three out of the last four quarters.

3) Stable and core cash flows from a spirits business, where Thai Bev has market dominance and pricing power, backed by restrictions on alcohol advertising in Thailand. As a measure of the division’s profitability, spirits’ operating margins of 20+% beat Diageo’s.

4) A stake in APB through its investment in F&N. As the APB takeover saga continues to unfold, we believe Thai Bev will not lose out even if APB is sold to Heineken at the end of the day. This is because its main target is F&N’s beverage business. Further, it could reap investment gains from the sale of APB.

Thai Bev today is Thailand’s biggest beverage producer, owning three breweries, 18 distilleries, six overseas distilleries and six manufacturing facilities for non-alcholic beverages. It has 93 sales offices covering every province in Thailand or some 400,000 points of sales.