Singapore & Vietnam: ThaiBev’s IPO could be a feint to seek buyer for Vietnamese unit - analysts

ThaiBev wants to spin off its brewery business in a Singapore initial public offering next year that could raise up to $2.5 bln, but analysts think the move is a feint intended to seek a buyer for the company’s richly valued Vietnamese unit, the Financial Times reported on December 11.

The proposed IPO, which would be the city’s biggest in almost a decade, would value its beer-making unit at up to $12 bln, according to two people familiar with the matter.

ThaiBev, which is owned by Bangkok-based billionaire Charoen Sirivadhanabhakdi, is best known for Thai beer brand Chang. In 2017 the company acquired a majority stake in Vietnam’s biggest beer producer Sabeco for nearly $5 bln.

Mr Charoen is Thailand’s richest man with a fortune of $19.6 bln, according to Bloomberg data, and acquisitions have transformed his group into one of south-east Asia’s biggest food and beverage players, with interests from soft drinks to frozen goods.

Carving out the brewing business could allow it to command a valuation higher than that of the ThaiBev group overall, whose stock price currently trades at 19 times next 12 months’ earnings.

Shares in Budweiser APAC, which was spun off from parent Anheuser-Busch InBev in a $5 bln Hong Kong IPO, trade at 48 times forward earnings.

Euan McLeish, an analyst at Bernstein, said that the proposed valuation post-IPO could cause issues. He added that with no immediate need for capital, the move could be intended to spur an offer from Budweiser APAC for Sabeco, which has a 55 per cent share of Vietnam’s market.

“Bud APAC management [has] made no secret of their desire to expand in Vietnam,” Mr McLeish said. “The challenge is that it’s very hard to see a valuation [for Sabeco] that satisfies everybody.”

ThaiBev paid 32 times pre-tax earnings for Sabeco when it bought the brewer from the Vietnamese government. ThaiBev’s stock — which is listed in Singapore — “will be crushed” by shareholders if Sabeco is sold for less than the purchase price.

“We think some sort of joint venture between the parties could be the best option,” Mr McLeish added.

Analysts at Jefferies added in a recent note that “Bud APAC [would be] well positioned to buy the business”.

However, one person familiar with ThaiBev’s plans said that a listing in the south-east Asian city-state could happen early in 2020.

“If they create value for shareholders they’ll do it,” the person added. “From my perspective it’s a quintessential IPO. If you wanted to sell the brewery business you could just do that.”

If a $2.5 bln IPO does materialise, the deal would be Singapore’s biggest IPO since 2011, when Hutchison Port Holdings Trust raised $5.5 bln, according to Refinitiv data.

ThaiBev’s shares have risen 48 per cent this year, while the benchmark SET index has been flat.

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