Thai Beverage share price plummeted by almost 10% the following day after the release of their 2nd quarter financial performance (ending 31 March 2019) to as low as S$0.735 per share from S$0.825 per share. This seems to be a knee jerk reaction to the unfavourable results for 2nd quarter relative to the previous financial period. However, the fact of the matter is that if I recall correctly, Thai Beverage is coming off from an abnormally highly skewed profit base for Q2 2018 which was mainly before the additional excise tax came in for alcholic drinks hence agents and retail outlets were stocking up as much as possible before the new measurement and price increase in April 2018 by Thai Beverage.
A better gauge of their financial performance should be for at least 6mths. Thai Beverage 1st half results were still 11.3% better overall than prior financial period albeit the decline for the 2nd quarter. I think that it is too soon to write off the good performance and to decide that Thai Beverage will underperform for the 2nd half of its financial year. Revenue for Beer is still on a rising trend.
|2nd quarter results-Revenue still improving.|
|Normalised net profit due shareholders is still up by 11.3% for first 6 months (excluding non-recurring M&A expenses)|
During the 1 day plunge in the share price of Thai Beverage following the release of the results, I had taken profits off 10,000 units of Starhill Global REIT and used the proceeds to accumulate 10,000 shares of Thai Beverage at S$0.740 a piece. My view is that it is still too early to conclude that Thai Beverage results will deteriorate and a better benchmark would be to wait 1 more quarter. Based on the 1st half excellent financial performance, I think that the shares of Thai Beverage were oversold. In addition, due to the global economic uncertainty, Thai Beverage remains a good diversification of one's portfolio with exposure to the South East Asia wine/beer market as well as the F&B (KFC) fast food segment in Thailand.