Thailand: CGS-CIMB Research downgrades ThaiBev to a ‘hold’ rating

CGS-CIMB Research has downgraded Thai Beverage (ThaiBev) to a “hold” rating with a lower target price of 70 cents from 90 cents previously, The Edge Singapore reported on April 20.

This comes as the brokerage has turned cautious on ThaiBev’s prospects ahead, given the restrictive measures imposed in Thailand and Vietnam to combat the spread of the novel coronavirus (Covid-19) pandemic.

The brokerage has forecast a decline in spirit and beer volumes of 8.9% and 16.1%, respectively, in FY20.

In turn, it expects revenue and earnings per share (EPS) to decline by 13.2% and 15.3%, respectively.

CGS-CIMB has also reduced its FY21 to FY22 EPS forecasts by 5% to 7.5%.

Starting on April 20, Thailand has imposed a nationwide ban on alcohol sales of varying periods for different provinces.

In Vietnam, the country has extended a lockdown on major cities until April 22, following a 15-day period of isolation nationwide on April 1.

“…With this new development, we believe that most of ThaiBev’s divisions could now see slower sales in the coming quarters, especially in 3Q FY20,” CGS-CIMB analyst Cezzane See writes in a note dated April 17.

While the brokerage notes that the company’s aggressive acquisitions in recent years have diversified its earnings base, the sluggish near-term volumes and lack of merger and acquisition catalysts are a concern.

As at 2.54 pm, ThaiBev was down 2 cents or 2.9% at 67.5 cents with 15.2 million shares changed hands.

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