Vietnam: Potential bidder says Sabeco is too expensive at current share price

A potential bidder for Saigon Beer Alcohol Beverage Corp. says Vietnam’s biggest brewer is too expensive at its current share price and the valuation of the nation’s largest consumer company should be the benchmark, Bloomberg reported on November 6.

Vietnam Dairy Products JSC, also known as Vinamilk, would make a good yardstick for comparison as both are market leaders in growing categories, according to Hui Choon Kit, chief financial officer of Fraser and Neave Ltd. His company is a vehicle for Thai Beverage PCL’s international expansion and also owns a stake in Vinamilk.

Shares of Sabeco, as the brewer is called, trade at about 38 times blended forward 12-month earnings, compared with the dairy producer’s 21 times, according to data compiled by Bloomberg as of November 6.

“The market price appears to be far in excess of where the fair value is,” Hui said in a telephone interview on November 3 from Singapore. “Just based on public financials, it seems to be way above global benchmarks.”

Vietnam, whose Communist government has embarked on a plan to divest from some of the country’s biggest companies, is an attractive investment destination with its young demographics and growing middle class. The scenario helped drive a 300 percent surge in beer demand since 2002, according to Euromonitor.

“It’s a big market and they have a good market share,” Hui said. Sabeco, which commands about 40 percent of the nation’s $6.5 billion beer market, is an attractive asset at the right price, he said.

This is the second potential bidder for the Vietnam brewer that has said its valuation is expensive. Asahi Group Holdings Ltd. expressed that view in September. Thai Beverage, controlled by billionaire Charoen Sirivadhanabhakdi, is among about a half dozen foreign companies including Anheuser-Busch InBev NV that registered last year to bid for a stake in Sabeco in what would be Vietnam’s biggest offering.

Shares of Sabeco have surged 44 percent this year, compared with the 26 percent jump in Vinamilk, the country’s most valuable company. The benchmark Vietnam Ho Chi Minh Stock Index has climbed 28 percent. Sabeco fell 1.7 percent at the close on November 6.

The brewer was valued at about $8.1 billion as of November 6. Asahi trades at about 18 times blended forward 12-month earnings, compared with 21 times for Carlsberg A/S and 20 times for Heineken NV.

Fraser and Neave has had experience working in Vietnam’s beer market from its earlier part ownership of Asia Pacific Breweries, which owns Tiger Beer. It sold the stake to Heineken five years ago.

“It’s a market that we know extremely well,” said Hui. “There are improvements that they can make to their operations, which we can hopefully assist them on,” he said, referring to Sabeco.

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