Asian brewer is world’s cheapest alcohol stock

By BLOOMBERG

SINGAPORE • Thai Beverage pcl (ThaiBev) has earned the title of the world’s “cheapest alcohol name” at Goldman Sachs, as the Bangkok-based brewer is now the worst performer in its consumer stocks coverage.

And analysts led by June Zhu said a turnaround in its operations in the financial year 2019 (FY19) will give the stock a nice lift.

Since losing S$6.9 billion (RM20.65 billion) this year, ThaiBev now trades at 15.3 times of future earnings — below its 10-year average — while the MSCI World Beverages Index trades at 19.9 times, according to data compiled by Bloomberg.

“The stock has reached its bottom, both on earnings and valuation,” June Zhu and Manik Mahajan, analysts at Goldman Sachs (Singapore) Pte Ltd wrote in a report last week.

“FY19 will mark the start of the turnaround” due to forecast improvements in farm incomes, wages and election spending. Shares of ThaiBev closed 4% higher, the biggest gain in almost two months on higher than the three-month average volume.

The company’s management is anticipating that higher agricultural income in Thailand and a strategy to replace short-term debt with long-term loans will improve finances next year.

Sanford C Bernstein analysts Euan McLeish and Yan Li upgraded the stock to ‘Market-perform’ from ‘Underperform’ last Friday, saying the stock’s valuation “now fairly reflects the weak domestic outlook and the lack of upside from the recent acquisitions.”