Souring Vietnam sentiments on beer may hit ThaiBev

The country’s new anti-drunk driving law took its toll on Sabeco’s beer volumes.

Concerns over drink driving laws in Vietnam dragged ThaiBev’s share price down 11.8% YTD, according to an analyst report by DBS Group Research.

OCBC Investment Research (OIR) echoed a similar sentiment, adding that the fall in share price could be largely attributed to the 9.8% correction after Sabeco announced its full year results in January with 6% YoY fall in revenue due to weaker sales volume.

However, OIR also mentioned that the management is confident in Sabeco's outlook given its strong branding in off premise and rural areas. DBS’ report also stated that Vietnam’s anti-drunk driving law will have a lesser impact due to Sabeco’s skew towards off-trade consumption.

“Given the outbreak of COVID-19, management expects to see larger impact from its Food segment but its contribution to 1QFY20 was minimal at 1.8%. We see any additional stimulus package from Thai government as positive on domestic consumption,” said Chu Peng, analyst at OIR.

Furthermore, RHB is also expecting Sabeco’s earnings growth to decelerate to the mid-to-high digits in FY2020. The report also noted that at the PATMI level, ThaiBev’s beer segment only constituted 2% of the group total.

“In terms of valuation, Sabeco accounts for 17% of our SOP-derived value for Thaibev. As such, the downtrend in share price is unjustified. We trim FY20-22F earnings by c.2%, as some of the on-trade alcohol and food consumption could be affected by the COVID-19 outbreak,” said Juliana Cai, analyst as RHB.

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