ThaiBev's net profit jumped 21% to $741.3m

But topline slipped by 3%.

According to DBS, ThaiBev’s FY13 net profit at THB19.1bn or around SGD741.3m (+21% y-o-y) was above expectations, despite topline declining by 3% to THB155.8bn.

A strong 4Q13 helped to prop up full year earnings with 3Q13 up by 92% to THB6.7bn. The strong y-o-y performance was due to better-than-expected performance from its Spirits segment, lower operating losses from Beer, contribution from its 28.6% stake in FNN (including Frasers Centrepoint Limited [FCL]), and a lower corporate tax rate of 20% (FY12: 23%).

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Spirits was a positive surprise. The Spirits segment’s strong performance in 4Q surprised us on the upside with 18% y-o-y revenue growth, driven by 6.6% and 10.8% volume and price increases, respectively.

Operating margins increased by 0.9ppts to 25.6% due to higher selling prices, draw down of inventories (on lower excise), and lower SG&A expenses.

Beer posted lower losses in 4Q. Despite the recent excise hike resulting in 15-20% increase in beer selling prices and a 15% y-o-y drop in volumes, Beer segment’s operating losses declined significantly to THB4m in 4Q13, down from losses of THB637m in 4Q12.

This was mainly due to higher gross margins (15.3% vs 4Q12: 11.7%) on lower input costs and lower selling and admin expenses.

Final dividend of THB0.30; payout ratio at 58%. The Board has proposed a final dividend of THB0.30. Coupled with the interim dividend of THB0.14, total DPS for FY13 will be THB0.44 (FY12: THB0.42), equating to a payout ratio of 58%.

Our View

Muted growth in FY14F. Despite the strong end to FY13, we are projecting growth to be muted at 2% in FY14F. With the current political situation and declining consumer confidence in Thailand, this may impact consumption, particularly with the recent hikes in excise duties.

Review of FNN/ FCL still underway. The review of its stakes in FNN/ FCL is still underway, and management was unable to share details.

An eventual consolidation of FNN and divestment of FCL may be deemed as positive, but we believe there is a need to review the structure and valuation if it were to happen.