ThaiBev's board injections to boost Sabeco

It appointed 4 board executives and 3 management personnel.

The third quarter was unpleasant for Thai Beverage (ThaiBev) as profits crashed by 61% no thanks to the weak performance of its spirit, non-alcoholic, and food businesses. However, analysts note the company’s prospects despite the rocky business conditions it is facing.

CGS-CIMB analyst Cezzane See noted that in the results briefing, ThaiBev was more open with regards to discussions relating to SABECO. In December 2017, Saigon Beer - Alcohol - Beverage Joint Stock Corporation (SABECO) was purchased for $6.52b as part of ThaiBev’s goals to expand and be the largest Southeast Asian beverage firm.

Currently, ThaiBev has four out of the seven board seats and has also appointed three key management personnel. “With greater control in place, management is getting into the nitty-gritty and has started working on implementing good corporate governance,” See said.

ThaiBev has also started assessing ways to improve the capabilities and efficiencies of SABECO’s supply chain, and improving business productivity with the aim of enhancing market share and earnings.

OCBC Investment Research analyst Deborah Ong added to this and expects the management to start implement efficiency improvements in the next six to twelve months, especially with regards to procurement of raw materials.

CGS-CIMB has previously pointed out that the SABECO deal was too expensive for ThaiBev. According to analyst estimates, its illustrative net gearing rose from 0.2x to 1.3x, implying that it paid close to 100% of the purchase consideration.

Associate contributions are forecast to grow by at least $82m (THB2b). However, this is dragged by an additional debt load of $147.98m-$164.42m (THB3.6b-4b)

“Over the longer term, we believe ThaiBev’s recent expansions beyond its domestic market will continue to help drive growth,” Ong said. “In particular, we see the Sabeco acquisition as a strategic entry to a growing market that will bear fruits in time."