asia pac food bev

8/12/2019 Asia Pac Food Bev

1/60

All rights reserved. Standard Chartered Bank 2010IMPORTANT DISCLOSURES CAN BE FOUND IN THE

DISCLOSURES APPENDIX. http://research.standardchartered.com

Nirgunan [email protected]+65 6307 1504

Asia Pacific | Food & Beverage EQUITY RESEARCH

20 October 2010

ASEAN BeerBreaking the Glass Ceiling

We believe the ASEAN beer industry has outstanding growth prospects. Beer consumption looks set to rise at an

average of 6% in the next three years, as it closely allied to higher disposable income. Both Thailand and the Philippines

are in the throes of a consumer boom. Also, the urban youth populations in those countries are among the highest in the

region, which is a fillip for beer demand. Their distribution systems are at a relatively advanced stage.

ASEAN presents the beer majors with alluring acquisition opportunities, in our view. Beer companies like SAB Miller,

ABInBev, Heineken and Molson Coors are facing stagnation in the West. We believe these cash-rich players are likely to

direct their attention to Asia. The region has just displaced the West as the worlds largest beer market. Although beer

demand is strong in Asia overall, ASEAN stands out, with Thai Beverage(12xFY10E) and San Miguel(13xFY10E) likely to

generate over 17% earnings CAGR in the next two years.

We expect the switch from glass bottles to disposable cans to transform Thai Beverages and San Miguel Corps cash

generation. A further shift to cans would reduce inventory burden, given their disposable nature. A similar transformationtook place in the US when cans were introduced in the 1930s. The companies should achieve FCF CAGR of 12% and

38% in the next 3 years. We believe the market is missing the FCF gains from the introduction of cans. We initiate

coverage on this sector with Outperform recommendations on Thai Beverage (37% upside) and San Miguel Corp (36%

upside), the dominant brewers in Thailand and the Philippines.

Mkt cap Up/ Revenue Net income FCF Yield

BB code Rec (US$m) Price PT Down ccy 2010E 2011E 2010E 2011E 2010E 2011E

Thai Beverage PCL THBEV SP OP 5,390 SGD0.28 SGD0.38 37% THBm 108 117 11 12.5 9% 10%

San Miguel Corporation SMC PM OP 5,225 PHP74 PHP101 36% PHPm 183 191 17 19 5% 8%

Note: OP = OUTPERFORM, UP = UNDERPERFORM, IL = IN-LINE; Prices as at 19 October 2010Source: Company, Bloomberg, Standard Chartered Research estimates


2/60

Sector research ASEAN Beer | 20 October 2010

2

Contents

Why ASEAN consumer? 3Secular trends favour Beer 7Beer cans change the picture 10ASEAN resembles America in the 1930s 14Beer majors may go shopping in ASEAN 17Valuation comparison 20The Big 4 are Cash-Rich and Hungry 25Company updates

Thai Beverage PCL 27San Miguel Corporation 42


3/60


3

Why ASEAN consumer?

Powerful trends favour consumerism in Asia

At the outset, we reiterate the underlying macroeconomic trends that have powered consumerism

in Asia. As these trends are familiar, we summarise them thus:

Middle class surge

One of the outcomes of the rising prosperity of the Asian economies is a growing middle-class

population. In the major Asian economies of China and India, hundreds of millions of people are

becoming prosperous.

A new market for household items, cars, food and healthcare has thus emerged in Asia. The

addressable market for everything from chocolates to motorcycles has increased with this

development. Growing consumerism is an obvious characteristic of a rise in the middle class

population.

A study by Surjit Bhalla of Oxus Investments (The Middle Class Kingdoms of India and China,

2009) defines the middle classes as those with earnings of between US$10 and US$100 per day.

The middle classes' share of the global population rose to 57% from 30% in 1990 to 2006,

according to this study. The study states that the proportion of the middle class population in Asia

surpassed the ratio in the West in the mid-2000s.

Fig 1: Middle class population as % of world total

0

10

20

30

40

50

60

70

80

1950 1980 2006

West Asia

Source: Oxus Investments, Standard Chartered Research

Asia is now the mainstay of the worlds middle class, creating a new market. Figure 1 illustratesanother aspect of middle class growth i.e., once a proportion of the population enters the middle

class, it swells rapidly. According to the Economist (12 February 2009), the proportion of middle

class in China in 1990 was only 15%. In 2005, it had swollen to 62%. This trend will be a fillip to

consumerism in this region, in our view.

Magical middle income status

When a country reaches an income per capita of US$2,000, consumption growth also

accelerates. The World Bank has identified an income per capita of US$2,000 as the threshold

for middle-income status. From this point, disposable income represents one-third of average

household income.

China has just entered middle-income status. Its income per capita in 2008 was US$2,480. India,on the other hand, is a long way off middle-income status, at an income per capita of US$1,040.

The impending arrival of these giant economies as middle-income countries represents a major

turning point, in our view.

Millions are enteringprosperity

Consumptionaccelerates atUS$2000 per capita


4/60


4

Urbanization

The migration of rural inhabitants to cities is another boost for consumerism in Asia. Urban

dwelling encourages consumer spending in two clear ways. First, the distribution costs are less in

an urban centre. It is easier to sell soap in a crowded city such as Mumbai or Jakarta than in therural hinterland. The transportation of goods is cumbersome given the poor infrastructure.

Second, urban dwelling changes taste and exposure. Migrants from rural areas are exposed to

the bright lights of the big city. They tend to acquire a desire for consumer goods. Marketing of

consumer goods can be more successful in cities compared to rural areas.

Asias urban growth has outstripped its total population growth. The urban population growth has

been 2.5% in the last 20 years, a figure almost twice the overall population growth rate, according

to the UN. In 2008, the urban population was 42%, compared with 33% in 1990. Here again,

China and India appear to be the global leaders in urbanization.

Thai and Filipino consumer story is comparable to India and China

Despite the excitement surrounding consumption in China and India, we believe the ASEAN

consumer sector deserves much greater recognition. The ASEAN consumer is no poor relation to

the Asian giants. The macro forces that have been cited in favour of Chinese and Indian

consumerism are actually stronger in the ASEAN region. The ASEAN consumer sector is trading

at 12x 2010 PER, compared to 21x 2010 PER and 17x 2010 PER for the Chinese and Indian

consumer sectors (according to Bloomberg). We feel this is unwarranted for the following

reasons:

Higher proportion of middle class

The proportion of the population within the middle class bracket in Thailand and the Philippines is

higher than that in China and India. Definitions of middle class are controversial. The former

Indian Minister Shashi Tharoor calls it a sociological not a logical category. A recent study by

the Centre for Global Development has used a more stringent definition of middle class. It adoptsa uniform definition of middle class between poor and rich countries, accounting for differences in

purchasing power.

The conclusions from the study (Working Paper 207, March 2010) are stark. Under the stringent

definition, Thailands middle class accounts for 8.7% of the population. The middle class

accounts for 17.4% of consumption. This compares favourably with India and China, where the

middle class proportion of the total population is half that of Thailand (see figure 7).

Migration to the citieshelps consumption

ASEAN regiondeserves recognition


5/60


5

Fig 2: Middle Class Statistics for Selected Countries (%)

Middle Class Size Middle Class Share

(proportion of population) (proportion of income/consumption)

1990 2005 1990 2005Ghana 0 0 0 0

India, urban 2 4 0 0

Indonesia 0 0 0 0

Morocco 4.4 3.5 9.8 7.3

China, urban 6 4.4 0 7

Thailand 4 8.7 0 17.4

Philippines 3 8.1 0 12.1

Turkey 10.1 15.9 17.6 27.4

South Africa 9.6 7.6 24.3 20.3

Mexico 17.7 28 29.9 40.5

Russia 24.4 29.8 36.3 43.9

Honduras 0 6.8 0 15.7Bolivia 8.2 12.2 17.6 25.4

Paraguay 4.8 18 10.9 31.5

Colombia 10.5 13.5 19.1 25.5

Ecuador 9.7 13.9 19.8 25.7

Brazil 16.4 19.4 31.7 33.1

Venezuela 20.6 3.2 34.8 8.1

Argentina, urban 39.1 30.5 53.2 46.4

Chile 20.6 32.7 32.5 41.9

Sweden 95 95 90.4 87.9

United States 93.8 90.9 84.4 81.2Source: Centre for Global Development, Standard Chartered Research estimates for the Philippines

Higher Per Capita Income

Thailands population is only 67m, which is only equivalent to 3% of the combined population of

China and India. The Philippines has a population of 90 m. However, we believe, the market is

ignoring the fact that the Thai economy achieved middle income status about 15 years ago. The

Philippines (GNI per capita of US$1,790) is expected to achieve the middle income milestone in

the next three years. Middle income status is when the income per capita is over US$2,000. In

fact, the GNI per capita of Thailand in 2008 was 25% higher than that of China and nearly four-

fold that of India. The Philippines GNI per capita is almost twice that of India. From this

perspective, we argue that the ASEAN consumer story is as appealing as China and India.

Less urban deprivation

Thailand and the Philippines have less urban deprivation than the Asian giants. The proportion ofthe population that lives in urban areas is higher in China than in Thailand. Thailand is on par

with India on this yardstick. However, only 12 % of the Thai urban population are slum dwellers.

The high urban populations of China and India include a huge proportion that inhabits the slums.

The slum dwellers are typically marginalized and cannot be seen as symbols of the rise of

consumerism.

The Philippines urban population is a larger proportion of the total population than the

corresponding ratio in China and India. This is an immense advantage for consumer companies

such as beer producers, as we will discuss later.

Thailand andPhilippines havehigher per capitaincomes


6/60


6

ASEAN consumer has been unscathed by the troubles and looks set to drive the economy

Thailand has been in the throes of political turmoil during the last year. There have been street

protests and violence in the capital, Bangkok. Business has been disrupted and over 90 people

were killed during two months of protests.

However, according to government statistics, the overall economy grew at 9.1% YoY in 2Q2010.

Private consumption expanded by 6.5% year-on-year in 2Q2010. On a QoQ basis it rose by2.7%. This is an encouraging swing in momentum. There was a clear boost in durable goods

purchase in 2Q2010.

Thai consumption is likely to receive a boost from the THB 116 billion (US$3.33 billion) fiscal

stimulus, announced in 2009. The stimulus package was designed to buttress consumption due

to the global economic slump. The package includes a monthly living allowance of Bt2,000

(US$66) per head for low-income earners. We believe some 9 million people will benefit from

this allowance. The fiscal stimulus also includes school subsidies and free electricity for certain

households.

Our economics team expects Thai GDP growth of 6.3% in 2010, followed by 4.8% in 2011. We

are especially optimistic about domestic consumption. The operative factors are the high savings

rate and the fiscal stimulus.

The Filipino economy has had a similar trajectory. The economy is dependent on remittance flow

from its expatriate workers. Remittance flows are 10% of the GDP. The Philippines economy is

not as dependent on exports as others. Remittance growth is expected to remain at 8% to 9%. It

is on a sound footing.

With the global downturn in 2008, there were fears that the remittance flows would dry up. That

was not the case. Recently, Canada and South Korea have reached employment agreements

with the Philippines. Consumption grew at (5%) YoY in 2009 and we expect it to continue in this

vein.

Our economics team expects GDP growth of 5.9% in 2010 and 5% in 2011 in the Philippines.Remittance flows from the vast number of Filipino expatriate workers should drive domestic

consumption growth. There are over 8m overseas Filipino workers.

Fig 3: Urban Population (2005)

Urban population % of Total Population Slum population % of Urban Population

China 43.1 37.8

India 29.5 55.5

Thailand 33.2 12.0

Philippines 65.0 29.9

Source: ESCAP Statistical Yearbook, Standard Chartered Research estimates

Stimulus is a boon forThai consumption

Remittance drivesFilipino consumption


7/60


7

Secular trends favour Beer

Rising per capita income

The principal driver of beer consumption is the per capita income level of a country. One reason

for the importance of the income per capita level is the affordability factor. The higher the income

per capita level, the more people who can afford beer. Another reason is that economic growth is

accompanied by a change in taste. Higher income levels also means that the distribution network

for consumer goods in general becomes stronger. The same network that distributes consumer

goods such as toothpaste, ice creams and beverages can be used for beer distribution.

The link between income per capita and beer consumption has been subjected to rigorous study.

Beer consumption increases with prosperity. Higher income per capita means that people have

more money to spend. We examined the beer consumption patterns for over 150 countries. We

found a 56% correlation coefficient between income per capita level (GNI per capita) and beerconsumption per capita.

Fig 4: GNI per capita in US$ (x axis) versus Beer consumption per capita in litres (y axis)

0

50

100

150

200

250

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

Source: Beer Institute, World Bank

A correlation coefficient of 56% may be significant, but it is not conclusive. There are some

places where beer consumption is poor despite the relatively high income per capita levels.

These include Norway, which has an income per capita that is 48% higher than Denmark.

However, Denmarks beer consumption per capita is nearly 3 times higher than Norways (143

litres versus 54 litres).

Beer consumption is more closely allied with better times than is spirits. People drink spirits in

both good times and bad times. In 2008, a year of tremendous economic upheaval, spirit

consumption rose in the US from 1.44 gallons per capita to 1.46. During the 2001 recession,

spirit consumption per capita rose 3%. The peak month for spirit consumption was ironically

September 2001. The terrorist attacks on the World Trade Centre and the Pentagon took place in

that month.

However, per capita beer consumption has a stronger correlation with rising income than with

absolute income. China has seen per capita beer consumption grow at 9% CAGR from 2002 to

2008. The income per capita grew at a CAGR of 10% in this period. During periods of economic

stagnation, beer consumption per capita suffers.

We have mapped the correlation between GNI per capita growth for the same group of countries

versus the Beer consumption per capita from 2002 to 2008. The correlation coefficient is much

stronger at 74%.

Norway has higherincome per capitathan Denmark butmuch lower beerconsumption per head

Good times drive beerdrinking


8/60


8

The inference from this data is clear. It is not only the absolute income level of a country that

drives beer consumption. The level of economic growth (or income per capita growth) is a

stronger variable. The favourable outlook for the Thai and Filipino economies should be of direct

benefit to beer consumption. Our economists expect GDP growth to average 6% in 10-12.

Urban Youth love beer

In 2002 to 2008, Thailand and the Philippines beer consumption per capita grew at one of the

fastest levels in Asia, during a period of rising incomes. In Thailand, consumption per capita grew

at 8% per annum. In the Philippines, a similar trend was observed, as the economy grew at an

average of 5%. The correlation with the rise in income per capita was clearly discernible.

There is another factor that gives the beer story in the ASEAN region an extra fizz. Thailand and

Philippines have some of the strongest urban youth demographics in Asia.

Beer is a mark of prosperity for youth, and urban youth are getting richer. The history of beershows that the urban youth are the core segment of society. They are at the forefront of

consumer tastes, and are growing as a proportion of the population in both the societies under

consideration. The percentage of the population between 15 and 35 is higher than the regional

average of 31%, although by only a few percentage points.

Fig 5: Percentage of Population between 15 and 35

36%

33%

25%

34%35% 35%

29%

31%

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

China

Thailand

Malaysia

India

Indonesia

Philippines

Singapore

Republicof

Korea

%

Source: UNDP

A closer examination of the demographics shows that Thailand and the Philippines have superior

statistics to the rest of the region. Non-slum urbanization levels are higher in these countries than

the major Asian countries. The urban population that does not reside in slums is 88% in Thailand

and 70% in the Philippines. The larger markets in Asia such as China, India and Indonesia have

a much larger slum percentage. The demographic factors in Thailand and the Philippines are

thus stronger for beer than elsewhere in the region. They have youthful, urban populations, the

overwhelming majority of which do not live in slums, where affordability and distribution of beer is

limited.

The relative prosperity and superior demographics of the Thai and Filipino urban youth are a

boost for beer consumption. The 18 to 35 age group is the ideal target market for beer. Beer is

viewed in emerging markets as an aspirational beverage. Young people who start drinking view

beer as a safer and more convivial form of alcohol, which they associate with sporting events and

parties. Also, social norms encourage the public display of beer drinking more than that of spirits.

Urban youth are thecore demographicsegment


9/60


9

Regulators favour beer

Historically, regulators have favoured beer over spirits or hard liquor. The alcohol content in

spirits is much higher, and they are associated with alcoholism. The stereotypical image ofalcohol abuse involves solitary consumption of spirits.

Beer, on the other hand, is associated with conviviality. Its alcohol content is a fraction of that of

spirits. In fact, one of the founding fathers of the US President Thomas Jefferson famously said

Beer, if drunk with moderation, softens the temper, cheers the spirit and promotes health.

During the prohibition era in the US (1920-32), nearbeer (less than 0.5% alcohol) was exempted.

Home brewing was permitted.

Excise taxes generally favour beer. This is particularly the case in Thailand and the Philippines.

Thailand has just faced a 26 % increase in the beer excise tax, but the excise tax regime is

kinder to beer than to spirits. This is the same for both countries.

Fig 6: Spirits versus Beer in Thailand

White Spirits Beer

Rate x % of Alcohol x Volume (640 ml bottle of beer) % of Ex-factory Price (640 ml bottle of beer)

Excise Tax 120 x 0.4 x 0.625 = 30 0.6 x 31.61 = 18.97

Municipal Tax 10% 0.1 x 30 = 3 0.1 x 18.97 = 1.9

Health Fund 2% 0.02 x 30 = 0.6 0.02 x 18.97 = 0.38

TPBS Tax 1.5% 0.015 x 30 = 0.45 0.015 x 18.97 = 0.28

Total Tax (THB) 30 + 3 + 0.6 +0.45 = 34.05 18.97 + 1.9 + 0.38 + 0.28 = 21.53

Total Tax % 5% 3%

Note: The Beer excise tax is on an ad-valorem basis.

Source: Thai Beverage

Distribution advantage

Thai Beverage and San Miguel have a tight grip on the distribution network, and their distribution

penetration is unrivalled in Asia, outside the city-states of Hong Kong and Singapore. Thai

Beverage has 400,000 points of sale (such as bars, restaurants, and roadside kiosks). This

works out to a distribution penetration of 168 per POS. We estimate the distribution penetration

for San Miguel to be similar at 150 per POS, which is even more impressive. The Philippines is a

large archipelago with a population of 90 million. These penetration figures are superior to the

rest of Asia. Outside Hong Kong and Singapore, we believe it is unlikely that any brewer can

match these distribution penetration figures.

Regulators are kinderto beer

Wide network of salespoints


10/60


10

Beer cans change the picture

At present, beer is sold principally in glass bottles. For instance, 81% of the beer sold by Thai

Beverage is in glass bottles. The dominant Filipino player San Miguel sells almost all of its beer in

glass bottles.

We expect cans to gradually displace glass bottles in the next 5 years in both Thailand and the

Philippines. Both societies have crossed the threshold where canned beer is financially viable.

They have crossed the canning hurdle. Both Thailand and the urban centers of the Philippines

have reached the US$5000 per capita level, and canned beer makes more sense at these

income levels. In fact, Canning companies have increased their capacity in both countries in

expectation of this trend. San Miguel and Thai Beverage are likely to vastly increase their

proportion of canned beer, in our view.

Brewers have avoided developing cans because distributing bottles is cheaper. Glass bottles are

returnable, and are often sold with a deposit that is repayable when the bottle is returned to thedistributor.

Fig 7: Thai Beverage Beer Bottles


Reducing inventory is the main virtue of cans

We believe that the onset of canned beer will transform the ASEAN beer industry. In the West,

the main reason for the success of canned beer was convenience. Cans are smaller than bottles.

They are also stackable and are less likely to break. This makes them easier to distribute and

transport. They are easier to transport to bars and restaurants, which found cans easier to keep

for longer periods.

However, convenience is not the sole benefit offered by cans in the ASEAN region. Canned beer

should emphatically improve inventory turnover. The first diagram shows the inventory cycle for

bottled beer. This chart serves as an approximation of the distribution system used by Thai

Beverage and San Miguel. The numbers in the chart are i llustrative of the impact of bottled beer.

In the bottle chart, the inventory cycle can take up to 100 days. The bottle is part of the brewers

inventory, even after the beer is sold to the wholesaler and then the retailer. It is only after the

bottle has been returned to the brewer, via the retailer and the wholesaler, that the inventory

cycle has been completed. The purchaser of the beer has to pay a deposit (Bt 60) in this

hypothetical case, in addition to the Bt 40 cost of the beer. In this illustration, we have

compressed the retailer stage and wholesaler stage for simplicity.

Cans set to graduallydisplace glass

Cans are easier totransport and store

They are less of aburden on inventory


11/60


11

Fig 8: Beer Bottle Inventory Cycle

Brewer20 days

60 deposit

+40 beer

30 daysRetailer Customer

Bt

100

Bt

120

(Bt 60) 25 days(Bt 60) 25 days

= Bt

100

Brewer20 days

60 deposit

+40 beer

30 daysRetailer Customer

Bt

100

Bt

120

(Bt 60) 25 days(Bt 60) 25 days

= Bt

100

Source: Standard Chartered Research

Canning has a completely different impact on inventory. Cans are generally not returnable. The

customer can dispose of them. There is no deposit. The beer drinker can throw it into the trash

can as soon as he has chugged it down. Importantly, the brewer does not hold it as inventory

after selling to the retailer or the wholesaler. The inventory cycle of 40 days is a lot shorter than in

the previous example.

Fig 9: Beer Can Inventory Cycle

Brewer5 days 15 days

Retailer Customer

40 beer20 can

15 days5 days

Brewer5 days 15 days

Retailer Customer

40 beer20 can

15 days5 days


The glass ceiling, so to speak, accounts for the gap in the inventory cycle and the cash

conversion cycle between giant beer companies and the brewers in emerging countries. Some ofthe Western companies have a positive cash conversion cycle.

Canned beer lightens the inventory burden. Inventory days are much lower for the Beer majors.

Hence, the cash conversion cycle tends to be lower for the Beer majors, who sell mostly canned

beer in Western markets. Typically, the four beer majors have a cash conversion cycle of less

than 50 days. The brewers in emerging markets have a cash conversion of cycle of around 100

days.

Inventory days shouldfall


12/60


12

The inventory cycle and the cash conversion cycle appear about to change for the better in the

ASEAN region. We expect canning to drive an improvement in these variables. The widespread

adoption of canning by Latin American brewers in the 1990s had a similar impact. Canning was

adopted in Brazil, Chile and Mexico once those countries reached a level of prosperity wherecanned beer was viable. The adoption of canned of beer by Cerveza in Mexico and Brazil led to a

25% improvement in their cash conversion cycle in 3 years. As Figure 10 shows, the introduction

of canning saw a solid improvement in operating income. Operating income rose at a CAGR of

33% in FY01-06, compared with a CAGR of 10% for the previous five years.

Fig 10: Femsa Cerveza: Impact of canning

2001 2002 2003 2004 2005 2006

Total revenue (Mexican Pesos m) 20,703 23,833 24,956 26,848 29,768 37,919

Income from operations (Mexican Pesos m) 3,740 4,460 4,634 5,101 5,800 6,210

Volume (m hectolitres) 23.8 23.8 24.6 25.7 27 37.7

Canned beer (% of volumes) 5% 8% 12% 17% 23% 32%

Source: FEMSA, Standard Chartered Research estimates for canned beer %

In our forecasts for Thai Beverage, we assume that the proportion of canned beer in the sales

volume will increase from 19% in FY09 to 40% in FY12. Figure 11 details the impact of this

process. Canning should have a broadly neutral impact on the cost of sales. Although there is

an increase in packaging costs per unit of sales as the firm increases its purchase of cans, the

overhead costs of cleaning, collecting and maintaining the bottles should fall. This is reflected in

our anticipated fall in the other category of the cost of sales from Bt 3 per litre to Bt 2 per litre

from FY09 to FY10 and FY11. We expect a further fall to Bt 1.5 in FY12.

Fig 11: Thai Beverage: Impact of Canning

FY2008 FY2009 FY2010E FY2011E FY2012E

Beer and Water sales volume (000 hectolitres) 8,697 6,674 6,981 7,367 7,771Canned beer % 12 19 25 32 40

Cost of Sales (Beer & Water) THB m 31,143 25,930 27,894 29,878 31,992

Beer and water: (Bt per litres)

Excise Tax 26.6 26.6 31.0 31.0 31.0

Packaging Material 7.0 7.0 8.0 8.5 9.0

Raw Material 3.3 2.6 2.6 2.6 2.6

Other 3.0 3.0 2.0 2.0 1.5Note: Please note that 1 hectolitre equals 100 litres.

Source: The Company, Standard Chartered Research estimates

As canned beer takes a hold of these markets, the inventory days and the cash conversion days

should fall. We expect the following improvements in Thai Beverages inventory cycle.

Canned beer shouldhave neutral impacton the cost of sales


13/60


14/60


14

ASEAN resembles America in the 1930s

There are striking similarities between the beer market in ASEAN today and the US in the 1930s.

In the US, Alcohol prohibition was lifted in 1933. A new paradigm in terms of drinking habits and

regulation arose.

Glass was on its way out

During prohibition, plastic cans were used to sell soup. The US had a reached a level of

consumption where beer cans had become viable. Previously, bottles were the principal means

of selling beer. The debate about canned beer and bottled beer did not start until the 1930s, prior

to which tin cans could not hold beer without exploding.

In 1935, soon after prohibition, the vinyl liner was invented. This prevents the beer from bursting

the cans seam. The first beer to use the new cans was Kruegers Finest Beer, based in Virginia.

The arrival was an instant public success. It was convenient to distribute and easy to consume.

Crucially, it was a boon for the brewers during the dark days of the great depression. Their

inventory cycle was shortened, and the working capital burden was eased.

Gradually, beer in cans spread in popularity to Europe. Unfortunately, production of canned beer

was stopped everywhere during World War II due to rationing. The Production of beer in cans

resumed after the war. Beer cans quickly reached high levels of popularity. The introduction of

the flat top can was a fillip to this process.

Consolidation

The beer market became consolidated with dominant players in each region, whereas it had

previously been dispersed. In the 19thcentury, there were 4000 breweries in the US. Brooklyn

itself had 48 breweries. People bought meat from the butcher, bread from the baker, and beer

from the brewer.

When prohibition ended, the industry consolidated. Big brewers like Anheuser-Busch had

survived prohibition by producing non-alcoholic drinks (like near beer), chocolates and ice cream.

They had a distribution network, which they exploited when prohibition ended. After prohibition,

the larger brewers benefitted from the onset of canned beer. By 1970, the consolidation was

complete. A similar structure to that of the 1930s US, with single brewer domination, is seen in

Thailand and the Philippines.

3-Tier distribution network

One of the consequences of prohibition was a new distribution system. Before prohibition,

brewers had exclusive arrangements with bars and other sales outlets. This was known as the

tied house system. Brewers had a hand and a stake in distribution.

The 21stamendment, which rolled back prohibition in 1933, set the stage for a strictly

administered three-tier system. An independent network of beer distributors served as

intermediaries between the brewers and the retailers.

The virtue of the three-tier system was that retail outlets were left to concentrate on their

business, and did not have to devote resources to subsidizing the distribution system. On-site

drinking at retail outlets was growing. By 1940 in the US, on-site beer sales represented 1/3 of

volume but of sales. Today, it is 50:50 in terms of volume, 70:30 in terms of sales. On-site

drinking is much more profitable for the retailers, who charge a heavy premium.

Cans appeared in1935, shortly afterprohibition was lifted

Independentdistributors


15/60


15

The ratio of on-site drinking versus off-site drinking in the ASEAN region is the similar to that in

the 1930s in the US. Thai Beverage also operates in a three-tier arrangement. They have

appointed a network of 930 agents and 4500 sub-agents, in addition to 1,050 direct sales

employees. The agents and sub-agents are independent and serve as intermediaries betweenthe brewer and the retail outlets.

Fig 15: Thai Beverages Distribution Network has 3 tiers


The 1930s saw Beer volume take off in the US

The confluence of these factors, all which are relevant to ASEAN in the 21stcentury, were

responsible for the transformation of the US beer industry.

Canning caught on, particularly after WW2. The proportion of beer that was canned in the US

increased by a factor of 6 from the end of the war in 1945 to 1950. The distribution advantage

was hard to resist, and canning is likely to have aided the escalation in beer consumption.

Fig 16: Cans as Percentage of US Beer Volumes

0%

8%3%

19%27%

31%34%

45%

53%50%

59% 59%

53% 51%48% 49%

0%

10%

20%

30%

40%

50%

60%

70%

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2008

Source: US Beer Institute

The arrival of canned beer in 1935 heralded a beer boom in the US. By 1950, per capita beer

consumption was just 10% below the pre-prohibition level of 20 gallons per capita (76 l itres).

Beer volume took offwith cans


16/60


16

Fig 17: US per capita Beer production/consumption (gallons per capita)

16.0

20.0

2.70.9

12.9

18.216.3

20.5

25.8 25.4

21.9 21.7 21.3 20.8 21.0 20.7 20.5 20.4 20.0

0

5

10

15

20

25

30

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: US Beer Institute

For the brewers, beer became much more of cash generative business. Prior to the can era, the

working capital situation was dire. Brewers had to wait for up to four months to collect their cash.

The three-tier distribution system also meant that brewers could focus on their principal activity

the production of beer. They were not burdened with distribution and retailing, which is a

localized and dispersed business.

When prohibition was lifted in 1934, the beer business was dominated by regional players. Each

region had a major player. This was in contrast to the dispersed nature of the pre-prohibition

market. The end of the Second World War saw further consolidation. By the mid 1970s, Miller,

Anhueser-Busch and Coors had cornered 50% of the US market. Today, they have 80% of the

US market. Basically, the can factor and three-tier distribution system led to the creation of giant,

nationwide brewers.

The onset of canning in the ASEAN region has many parallels with the US in the mid-1930s.

Canning is likely to strengthen the cashflow of Thai Beverage and San Miguel. The growth of the

industry may accelerate along the lines of the 1935 to 1950 boom in US beer.

Cans led to bettercash generation


17/60


17

Beer majors may go shopping in ASEAN

Asia has become the largest beer market

According to Japans Kirin Institute of Food and Lifestyle, in 2009 Asia exceeded Europe in beer

production for the first time ever. Beer is almost entirely consumed domestically, and thus Asia is

the largest beer market in the world. Chinas rise is at the core of the shift to Asia.

Fig 18: Beer production (% of World Total)

34.1

30.5

24.9

32.4

15

20

25

30

35

40

1999 2009

Europe Asia

Source: Kirin Institute

This development is an important signal for the four giants of the beer world Anheuser-Busch

InBev (ABI), SABMiller, Carlsberg and Heineken. These four Western companies supply roughly

50% of the worlds beer.

Cash-rich giants face stagnation in the West.

All four giants are facing stagnation in the Western markets. Beer volume and revenue growth

has been barely 1% in the past 5 years in Europe and the US. This Western stagnation is

expected to worsen. The beer industry is expected to grow by 6% CAGR in the next five years (in

terms of volumes), according to Datamonitor. The growth will mainly be in emerging markets.

It is likely that these beer giants will turn their sights to Asia, the worlds most vibrant market for

beer. These players have deep pockets and the appetite for a shopping spree, in our view. The

cash mountain that they have accumulated is detailed elsewhere in the report.

China is dispersed

China is the largest beer market in the world. It has doubled its beer production in the last decade.

The US has been emphatically displaced. A decade ago, China trailed the US. Today, China

produces and consumes 71% more beer than the US. The Chinese beer market has grown at

10% per annum in the last decade. This is a seismic shift.

Despite the rapid growth in China, the beer business has not been particularly profitable. In fact,

the profits have trailed the US. ABInBev, the worlds largest brewer, has generated EBITDA

margins of just 14%. In the US, ABInBev has recorded EBITDA margins of 41%.

The reason for the poor profits in China is the dispersed nature of the market. Scale has proved

elusive. The top two brewers control just a third of the market. The brewery business is highly

fragmented, with many small regional players.

Weak growth in West


18/60


18

Fig 19: Beer Production

2009Ranking Country

Production volume(kiloliters) Change from 1999

Production volume(kiloliters)

1999Ranking

1 China 42,363,800 104.3% 20,738,800 2

2 United States 23,023,400 -1.0% 23,256,000 1

3 Russia 10,850,000 141.4% 4,495,000 8

4 Brazil 10,800,000 35.0% 8,000,000 4

5 Germany 9,998,400 -11.4% 11,280,000 3

6 Mexico 8,232,500 41.8% 5,807,300 6

7 Japan 5,996,100 -17.0% 7,224,400 5

8 United Kingdom 4,514,100 -22.0% 5,785,400 7

9 Spain 3,380,000 30.7% 2,585,200 10

10 Poland 3,220,000 43.1% 2,250,000 13

11 Ukraine 3,050,000 258.8% 850,000 28

12 South Africa 2,564,000 -1.0% 2,590,000 9

13 The Netherlands 2,537,700 3.2% 2,460,000 11

14 Venezuela 2,314,100 36.1% 1,700,000 17

15 Vietnam 2,300,000 206.7% 750,000 31

16 Canada 2,239,400 -2.4% 2,295,100 12

17 Columbia 2,014,000 25.9% 1,600,000 19

18 Thailand 1,945,000 85.3% 1,049,900 25

19 Belgium 1,800,900 23.6% 1,457,000 20

20 Republic of Korea 1,799,500 7.8% 1,669,200 18

21 Czech Republic 1,781,300 0.9% 1,766,000 16

22 Australia 1,775,900 0.3% 1,770,000 15

23 Romania 1,760,000 58.3% 1,111,700 24

24 Argentina 1,700,000 30.3% 1,305,000 21

25 Nigeria 1,600,000 190.9% 550,000 36

Total 180,999,200 32.2% 136,919,400

Source: Kirin Institute

India is hard to enter

Venturing into India is also problematic. Despite being a low income country, India is a country of

heavy drinkers, but beer has not taken a hold. India is one of the largest consumers of whisky in

the world, but one of the lowest consumers of beer. Beer in India has not matched the sharp

growth of China, and annual per capita consumption stands at just 0.6 liters, which is roughly a

pint. This is compared with 31 liters in China, an average of 73 across Europe, and 76 in the U.S.

The potential for beer consumption in India hinges on demographics. Nearly 60% of the

population are below 30. GDP growth has averaged 8% in the last 5 years. Standard Chartered

expects GDP growth to continue at this pace. Not only does India have a hot economy, it has a

swelteringly hot climate. These are ideal hunting grounds for beer producers.

Indians are unlikely to shed their preference for spirits. Brewers are faced with massive

bureaucratic curbs. It is difficult and costly to win customers. Building a national footprint is

actively discouraged by the regulations. Import tariffs are among the highest in the world. The

state governments impose an excise tax of up to 150%. A pint of Indian beer costs about US$3,

which is three times a shot of local whisky. India has disallowed beer ads. This is a formidable

barrier to entry.

The Kingfisher brand, controlled by United Breweries, rules the roost. It has a 45% share.

SABMiller, one of the international brewers, comes in second with 37%. Apart from Kingfisher,

the rest of the market is dispersed. New entrants such as Heineken and Carlsberg are struggling

to cross the 10% threshold in market share.

High excise taxes


19/60


20/60


20

Valuation comparison

We have valued Thai Beverage and San Miguel using the DCF methodology. The price targets

that we have derived imply 30% upside. Other valuation metrics support our case for these

companies.

FCF yield improvement is the clincher

Thai Beverage and San Miguel are trading at FCF yields of 9% and 5% (2010E). These figures

are at the top end of the emerging market yields. Other ASEAN brewers such as Carlsberg

Malaysia and Grupo Modelo are behind them, but Thai Beverage and San Miguel are generating

poorer FCF yields than developed market players such as Heineken (10.5%), Asahi Breweries

(9%), ABInBev (9%), and Molson Coors (8.5%).

Fig 20: FCF Yield (2010E)

FCF YieldEmerging markets

Cervezas 7.3

Carlsberg Brewery Malaysia 7.2

Thai Beverage 9.1

Ambev-Pref 6.9

Grupo Modelo-C 5.6

Tsingtao Brewery Co H 5.2

San Miguel Corporation 5.0

Guiness Anchor Bhd 5.0

Beijing Yanjing Brewery Co A 4.4

Hite Brewery Co -4.3

Emerging Markets Average 4.9

Developed markets

Heineken Nv 10.5

Asahi Breweries 9.0

Anheuser-Busch InBEV 9.0

Molson Coors-B 8.5

Foster's Group 7.6

SAB Miller 5.9

Developed markets Average 8.4

Industry Average 6.5

Source: Bloomberg, Standard Chartered Research for Thai Beverage and San Miguel Corporation

The crucial difference, in our view, is that San Miguel and Thai Beverage are on the brink of a

step up in FCF generation. The onset of cans should cut the inventory days, lessen the working

capital burden and widen the FCF yield. We expect FCF CAGR of 38% and 12% for San Miguel

and Thai Beverage in FY10-12.

The beer producers in the mature markets are expected to generate FCF CAGR in the single

digits, according to Bloomberg. This underlines the value proposition offered be the ASEAN

brewers.

PER and EV/EBITDA

On both PER and EV/EBITDA bases, both players are at a 20-30 % discount to the industry

average. The discount to the Chinese players is particularly wide. The Chinese brewers are

trading in the low 30x in terms of PER and on EV/EBITDA ratios of between 11x to 15x.

The FCF advantagewill get better


21/60


21

The comparison that underlines the value of the ASEAN players is with the beer majors

ABInBev, SAB Miller, Molson Coors and Heineken. These companies are trading at similar

multiples to Thai Beverage and San Miguel, but their operations are mostly in the low growth

markets of the West. The beer majors lack the growth potential of the ASEAN pair, in our view.

Fig 21: Beer Industry: Comparative PER and EV/EBITDA ratios (2010E)

PER (x) EV/EBITDA (x)

Emerging markets

Beijing Yanjing Brewery Co A 32.1 11.0

Tsingtao Brewery Co H 32.0 12.0

Grupo Modelo-C 21.9 8.7

Ambev-Pref 19.4 11.1

Hite Brewery Co 18.3 15.9

Cervezas 16.2 9.6

Guiness Anchor Bhd 15.6 9.7

Thai Beverage 11.7 8.1

Carlsberg Brewery Malaysia 13.1 8.5

San Miguel Corporation 12.8 6.1

Emerging Markets Average 19.7 10.1

Developed markets

Anheuser-Busch I 19.1 10.2

SAB Miller 18.9 13.7

Carlsberg 18.7 8.2

Foster's Group 15.7 10.4

Heineken Nv 15.0 8.7

Asahi Breweries 14.8 6.7

Molson Coors-B 14.1 14.1

Developed Markets Average 16.6 9.6

Industry Average 18.3 9.2

Source: Bloomberg, Standard Chartered Research for Thai Beverage and San Miguel Corporation

The value that San Miguel and Thai Beverage represent is brought home by the PEG ratio

comparison. PER ratios are more meaningful when compared to earnings growth. The PEG

ratios reveal a wide chasm between our picks and the industry average. The discount is in the

50-60% range. These companies are dominant players in markets where beer volumes are rising

at around 6%.

Wide chasm in PEG


22/60


22

Fig 22: Beer Industry: PEG ratios (2010E-12E)

PEG

Emerging markets

Beijing Yanjing Brewery Co A 5.3

Hite Brewery Co 3.7

Guiness Anchor Bhd 2.5

Grupo Modelo-C 2.3

Ambev-Pref 1.7

San Miguel Corporation 1.4

Tsingtao Brewery Co H 1.4

Cervezas 1.3

Thai Beverage 1.3

Carlsberg Brewery Malaysia 0.5

Emerging Markets Average 2.1

Developed markets

Foster's Group 1.8

Carlsberg 1.6

Asahi Breweries 1.5

Molson Coors-B 1.2

Anheuser-Busch I 1.1

SAB Miller 1.1

Heineken Nv 1.0

Developed markets Average 1.3


Source: Standard Chartered Research estimates for Thai Beverage and San Miguel Corporation

P/B versus ROE and ROA

The P/B versus ROE metric is another way of confirming the DCF valuation. The efficiency of a

consumer play is marked by the degree to which it extracts returns from its equity base. A higher

forecast ROE signifies a better use of the equity base. A lower P/B to ROE ratio implies that the

company is cheaper. San Miguel and Thai Beverage are trading at a similar discount to the

industrys average P/B to ROE valuation of 0.15x.

Undervalued on thismetric


23/60


23

Fig 23: ROE (2010E) and P/B

ROE P/B P/B to ROE (x)

Emerging markets

Guiness Anchor Bhd 33.4 5.4 0.16

Ambev-Pref 22.8 5.6 0.24

Cervezas 22.0 3.4 0.16

Carlsberg Brewery Malaysia 21.9 3.0 0.14

Thai Beverage 18.8 2.9 0.15

Tsingtao Brewery Co H 18.1 5.9 0.32

Grupo Modelo-C 13.6 3.1 0.23

Beijing Yanjing Brewery Co A 10.1 3.6 0.36

San Miguel Corporation 8.0 1.0 0.14

Hite Brewery Co 3.7 0.6 0.15

Average 17.2 3.5 0.21

Developed markets

Foster's Group 27.1 4.4 0.16

Heineken Nv 17.4 2.1 0.12

Anheuser-Busch I 14.6 3.0 0.20

Carlsberg 13.6 2.8 0.20

Asahi Breweries 9.3 1.3 0.14

Molson Coors-B 8.7 1.2 0.14

Average 15.12 2.5 0.16

Industry Average 16.6 3.1 0.19

Source: Bloomberg, Standard Chartered Research estimates for Thai Beverage and San Miguel Corporation

P/B to ROE comparisons are skewed by the capital structure. San Miguel has an ROE of 8%,which is half the industry average, but the firms ROE has been depressed by the recent rise in

its equity base. The equity base rose from PHP 168 billion in FY08 to PHP 241 billion in FY09.

The company recorded a PHP 50 billion net gain from the divestment of its share in a subsidiary.

This increased its cash reserves and unappropriated earnings.

The P/B to ROA comparisons strip out changes in the capital structure, such as increases in the

equity base. On this metric, San Miguel, as well as Thai Beverage, have among the highest

ROAs. Their P/B valuation does not reflect this factor.

The two firms areamong the highestROAs


24/60


24

Fig 24: ROA (2010E) and P/B

ROA P/B P/B to ROA

Emerging markets

Carlsberg Brewery Malaysia 36.7 3.0 0.08

San Miguel Corporation 14.9 1.0 0.07

Ambev-Pref 14.6 5.6 0.38

Thai Beverage 13.7 2.9 0.21

Guiness Anchor Bhd 12.6 5.4 0.43

Cervezas 11.1 3.4 0.31

Tsingtao Brewery Co - H 9.2 5.9 0.64

Grupo Modelo-C 8.7 3.1 0.35

Beijing Yanjing Brewery Co - A 2.4 3.6 1.51

Hite Brewery Co 1.9 0.6 0.30

Average 12.6 3.5 0.43

Developed markets

Carlsberg 14.5 2.8 0.19

Molson Coors-B 6.4 1.2 0.19

Heineken Nv 5.0 2.1 0.42

Anheuser-Busch I 4.1 3.0 0.73

Asahi Breweries 3.5 1.3 0.39

Foster's Group -6.1 4.4 -0.71

Average 4.6 2.5 0.20

Industry Average 9.3 3.0 0.32

Source: Bloomberg, Standard Chartered Research estimates for Thai Beverage and San Miguel Corporation


25/60


25

The Big 4 are Cash-Rich and Hungry

Potential buyers have massive cash reserves

We believe the big 4 beer players are likely to set their sights on the ASEAN region, and their

interest may lead to a revaluation of companies such as Thai Breweries and San Miguel.

The big 4 are marked by massive cash reserves and underleveraged balanced sheets, and can

easily raise more cash for an acquisition. ABInBev stands out on this list.

Fig 25: Beer Majors Cash Reserves (US$ m)

501

3,689

745 734.2

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

SAB Miller ABinBev Heineken Molson Coors

Source: Bloomberg

Fig 26: Beer majors: Net Gearing (%)

41.91

136.71 144.63

-21.29-40

-20

0

20

40

60

80

100

120

140

160

SAB Miller ABinBev Heineken Molson Coors

Source: Bloomberg


26/60


26

Big 4 Face low growth in the West

Fig 27: Overview of Beer Majors

Anheuser-Busch Heineken SABMiller Molson Coors

Headquarters Anheuser-Busch InBev, Tweede Weteringplantsoen 21, One Stanhope Gate, 1225 17th St.,

Brouwerijplein 1, 1017 ZD Amsterdam, London, Ste. 3200,

3000 Leuven, the Netherlands. W1K 1AF, Denver, CO

Belgium. England 80202

United States

Main Brands Budweiser Amstel Pilsner Urquell Coors Light

Stella Artois Cruzcampo Peroni Nastro Azzurro Blue Moon Belgian Wheat Ale

Becks Birra Moretti Miller Genuine Draft Keystone

Net income (US$m) 4,613 1,420 1,910 720

Revenue (US$m) 36,758 20,500 18,020 3,032

Source: Datamonitor, Bloomberg

ABInBev and Heineken are two of the beer majors who appear to be actively on the lookout for

emerging markets. ABInBev is the product of the Belgian brewer InvBevs US$52 billion

acquisition of Anheuser-Busch in November 2008. The merged company became the largest

brewer in the world with annual production of 400 million hectolitres.

Despite its scale, ABInBev is constrained by the fact that 60% of its revenue comes from thedeveloped markets. Beer volumes are flat in these markets. The biggest challenge that ABInBev

faces is the faltering volumes in the US. The US accounts for half of ABInBevs EBITDA. Beer

volumes have fallen by 7% and 3% in the last two quarters.

Emerging markets have been their saving grace. In Brazil, beer volume rose almost 14% in

2Q10. A foray into the dynamic ASEAN region should thus be a welcome move for ABInBevs

shareholders.

Heineken has been further down the emerging market acquisition trail. Earlier this year, they

bought the beer unit (Cerveza) of the Mexican company Fomento Economico Mexcano (Femsa)

for US$8 billion in stock. Cerveza was valued at 11x EV/EBITDA. Cerveza operates in Mexico

and Brazil, where beer volume growth easily outstrips the mature markets. The deal increasedHeinekens share of global beer volume to 9.2% from 6.9%. They have managed to retain their

position as the second largest beer company in terms of volume.

Cerveza unit ofFemsa was priced at11x EV/EBITDA


27/60


27

Thai Beverage PCL

OUTPERFORM (initiating coverage)PRICE as at 19 October 2010

SGD0.28

Price target

SGD0.38

Cans will do the trick

Bloomberg code Reuters code

THBEV SP TBEV.SI

Market cap 12 month range

SGD7.03bn (US$5.39bn) SGD0.23 - 0.29

EPS est. change n.a.

We initiate coverage on Thai Beverage with an Outperformrating and a price target of S$ 0.38, implying 37% upside.

Thai Beverage is the leading brewery in Thailand with amarket share of 55%.

We believe Thai Beverage is ideally placed to gain from thebeer boom in Thailand. The beer industry should gathermomentum with the onset of canned beer.

Year end: December 2009 2010E 2011E 2012ESales (THBm) 107,969 107,793 111,663 115,128

Gross profit (THBm) 31,360 33,696 35,512 33,093

EBIT THBm 15,542 16,709 18,794 21,547

Interest Expense THBm 548.6 1,181.2 1,081.3 1,040.1

ontrib. r new invts acqu THBm 11.2 330.6 363.7 0.0

PBT (THBm) 15,004.8 15,858.5 18,075.8 20,506.7

Tax % 30.60 30.60 30.60 30.60

Earnings (THBm) 10,566.4 11,001.0 12,539.2 14,225.5

EPS (THB) 0.42 0.50 0.57 0.65

DPS - net (THB) 0.33 0.26 0.30 0.34

Dividend cover (x) 1.3 1.9 1.9 1.9

Sales growth (%) 2.4 -0.2 3.6 3.1

EBIT growth 3.4 7.5 12.5 14.7

EP growth 2.2 18.8 14.0 13.4

DP -net growth 10.0 -19.7 14.0 13.4

FCF Yield (%) 10 7 8 9Dividend yield (%) 5 4 5 6PER (x) 14.7 11.7 10.7 9.4

EV/EBITDA (x) 8.7 7.6 7.1 6.4

Source: Company, Standard Chartered Research estimates

Share price performance

0.230.240.250.260.270.280.290.300.31

Oct09 Jan10 Apr10 Jul10 Oct10

ThaiBeveragePCL STRAITSTIMESINDEX(rebased)

Share price (%) -1 mth -3 mth -12 mth

Ordinary shares -2 -2 10Relative to Index -5 -9 -7Relative to Sector - - -Major shareholder Siriwana Company Limited (45.3%)Free float 36%

Average turnover (US$) 1,729,870

The Thai beer industry has compelling prospects. Beerconsumption looks set to rise at over 6% in the next threeyears, having a close correlation with higher disposableincome. The Thai urban youth population is relativelylarge and prosperous, which is ideal for beer sales. ThaiBeverage has a wide distribution network reaching thecountrys main sales points.

Thai Beverage is a potential acquisition target. Theworlds major beer companies such as Anheuser-BuschInBev are facing low growth in the Western markets. They

could be looking for acquisition opportunities in emergingmarkets, where beer demand is accelerating. Recently,Heineken acquired the Mexican beer unit of Femsa at anEV/EBITDA of 11.2x, which is a sharp premium to ThaiBeverage. Thai Beverage may be revalued as moreemerging market acquisitions take place, in our view.

The introduction of cans is likely to improve FCFgeneration. We expect a gradual shift from bottled beer tocanned beer. Bottles lengthen the inventory cycle anddepress the FCF generation. Cans are disposable, andshould be instrumental in cutting Thai Beverage inventorydays from 87 in FY09 to 64 in FY12. The impact should beFCF CAGR of 12% in FY10-12.

Other metrics support our DCF valuation. At 12x FY10EPER and 8x EV/EBITDA, Thai Beverage is below theindustry average. It is also at a 60% discount to the PEGratio average of the peer group. We believe the market ismissing the FCF benefits of canned beer.

Source: Company, Bloomberg

Nirgunan [email protected]+65 6307 1504


28/60


28

Investment Summary

Earnings growth driven by rising beer volumes

We expect 17% earnings CAGR in 2009-12, based on improved prospects for the beer segment.

The beer segment should be see increased sales volumes. Thai Beverage is the dominant beer

producer (55% market share) in Thailand. Thai beer consumption looks set to rise by an average

of 6% in the next three years. Structural reasons such as a large middle class, favourable urban

youth demographics and an advanced distribution network should push beer consumption.

Thailand has one of the highest points of sale per capita ratios.

Thai Beverages beer segment is on the brink of a recovery, and we believe the firm is likely to

control costs after a 27% rise in the excise tax in 2009. We expect a relatively stagnant cost of

sales in the forecast period, and we believe the beer segment is likely to pass on part of the

increased costs to the consumer in FY10-12. The spirit segment should grow, but at the moremuted pace of 3% per annum in FY10-12.

Fig 28: Beer volumes

FY2008 FY2009 FY2010E FY2011E FY2012E

Beer segment (Sales Volumes, 000 litres) 8,290 6,360 6,711 7,082 7,470

Net earnings (THB m) 10,342 10,566 11,673 12,710 14,454

Note: Please note that the Beer segment also includes water.

Source: The Company, Standard Chartered Research

Introduction of cans should drive FCF improvement

We expect the increased use of canned beers to transform Thai Beverages FCF generation.Bottled beer increases the inventory burden as the bottles are returnable. Cans are disposable

and should reduce the inventory cycle. The proportion of beer volume represented by canned

beer should increase from 19% in FY09 to 40% in FY12.

The onset of canned beer should lead to an improvement in FCF generation, with inventory days

will fall from 87 to 64. The cash conversion cycle should fall from 79 to 56 days. We believe this

will translate to a FCF CAGR of 12% in the forecast period. Any FCF improvement will have a

direct impact on our DCF-based valuation.

Stable Balance sheet

Thai Beverage is well-funded and under-leveraged. The firm has a cash balance of THB 2.5

billion. Despite a dividend payout rate of 55 to 70% in the forecast period, the company shouldhave net cash in FY11 and FY12. Large FCF generation should more than meet the companys

dividend payments and capital expenditure. We do not expect the company to increase its

leverage.

Dominance is unlikely to be shaken.

Thai Beverage has a tight grip on the Thai beer and spirit market. It has a 55% market share in

beer and a similar dominance of the spirit market. We are confident that it will maintain this

position. The firm has its tentacles on the distribution system with 400,000 points of sale. It also

ranks very high on the branding surveys. According to the Beer Service Annual Report,Thai

Beverage beer brands (Chang, Archa and Chang Draft) are the top 3 brands in terms of market

share in Thailand.

We expect 17%earnings CAGR

Wide reach and brandrecognition


29/60


29

Valuation

We employ a DCF methodology to calculate our valuation for Thai Beverage. The company

operates mainly in Thailand. We thus assume a market risk premium of 8%, in line with our

reference point for other companies of this scale in the region. Our risk-free rate of 2% is

equivalent to the 10-year Treasury bill rate for Thailand. We have assumed a Beta of 1, as we

believe Thai Beverages earnings are more susceptible to risk than the official beta suggests. The

official Beta on Bloomberg is a lot lower. We have decided to increase it because we view Thai

Beverages performance as more volatile than the market assumes.

We assume a target debt-to-equity ratio of 30%. The company is operating at a net debt-to-equity

ratio of 17%. The companys gearing should fall due to vigorous cash generation in the forecast

period, and we believe the actual gearing level is likely to be lower than our target. However, we

have assumed a higher leverage in our WACC calculations to be conservative. The debt

premium of 3% is a reflection of the stature of Thai Beverage, as a major Thai corporate. This

leads us to a WACC of 11%

Our DCF valuation assumes a terminal growth rate of 1% in perpetuity. The terminal growth rate

is based on our long-term expectation of Thailands GDP growth rate. The Thai GDP growth rate

has averaged 4.7% since the Asian crisis of 1997-98. We expect it to rise to an average of 6% in

the next three years. Hence, we believe our terminal growth rate is a reasonable assumption.

Fig 29: WACC Calculations

WACC 11%

Cost of Equity 10.50%

Cost of Debt 10.50%

Equity Beta 1.00

Debt Beta 1.00Asset Beta 1.00

Risk Free Rate 2.0%

Market Risk Premium 8.00%

Target Gearing 30.00%

Effective Corporate Tax Rate 20.00%

Debt Premium 3.00%Source: Standard Chartered Equity Research

11% WACC is

reasonable

Fig 30: DCF Assumptions

WACC 11%

Terminal growth rate 1%Source: Standard Chartered Research estimates


30/60


30

Our DCF analysis provides us with a price target of SGD 0.38, which implies potential upside of

38%. At our price target, Thai Beverage trades at 11x PER 2010E and at 11x EV/EBITDA 2010E.

Fig 31: DCF Calculations (THB m)DCF of operations 32,729

NPV of the terminal value (THB m) 170,159

Total value of the operations (THB m) 202,888

Net (cash)/debt (THB m) 9,396

Equity value (THB m) 193,492

Equity value per share (THB) 8.79

Equity value per share (S$) 0.38


We have also run a sensitivity analysis for the DCF valuation:

Fig 32: Sensitivity AnalysisSensitivity of Equity value (THB m)

WACC

193,492 6.2% 7.2% 8.2% 9.2% 10.2%

-1.0% 282,968 246,198 217,478 194,428 175,522

0.0% 327,809 279,651 243,325 214,951 192,178

1.0% 390,064 323,984 276,402 240,510 212,475

2.0% 482,322 385,533 320,237 273,219 237,752Terminal

growth

3.0% 633,156 476,744 381,094 316,565 270,100


PEG ratios

We have compared the PER ratios to expected FY10-12 earnings CAGR for brewery industry.

Thai Beverage stands out at a massive discount to the industry average. There is, however, a

mismatch between the PEG ratios of the developed countries and the emerging market brewers.

The discount to the developed country brewers is only 16%, but the discount to the emerging

market brewers is 46%. We believe one would be hard pressed to find a more undervalued

emerging market brewer.

Fig 33: PEG ratios

Thai Beverage 1.3


Developed Country Brewers 1.3

Emerging Market Brewers 2.1Source: Bloomberg, Standard Chartered Research estimates for Thai Beverage and San Miguel Corporation

P/B versus ROE

Thai Beverage stands out in this metric. Its ROE is superior to the industry average, as well as

both the developed country brewers and emerging market brewers. The P/B to ROE discount

implies that Thai Beverage is undervalued, and we believe the company deserves to trade at a

higher P/B multiple

46% discount toindustry


31/60


32/60


32

How we stack up?

Broker recommendations

Despite the run-up in the stock price, the present broker recommendations are evenly split

between 2 Buys and 2 Holds, according to Bloomberg. The average price target is S$0.29, which

is in Hold territory, as opposed to our price target of S$0.38.

We are in line with consensus in 2010 and 2011 but ahead in 2012

Our net income forecasts are in line with the Bloomberg consensus in 2010 and 2011. We are

just 2% and 3% above consensus on those years. However, we are 11% above consensus in

2012.

This difference can be attributed to our conviction that beer volumes will rise in excess of GDP

growth. We expect a 7% rise in beer volumes in those years. We are more optimistic on the

sustainability of the companys earnings than the market. We are confident of the fundamental

case for beer in Thailand.

Fig 36: Forecasts compared to Consensus

2010E 2011E 2012E

THB m ConsensusStandard

Chartered Difference ConsensusStandard

Chartered Difference ConsensusStandard

Chartered Difference

Sales 116,649 107,793 -8% 122,211 111,663 -10% 124,903 115,128 -8%

Net profit 10,806 11,001 2% 12,169 12,539 4% 12,777 14,225 11%Source: Bloomberg, Standard Chartered Research estimates

What is the market is missing?

We believe that Thai Beverages current valuation of 12x PER 2010E and 8x EV/EBITDA does

not do justice to the momentum of its earnings and cashflow. We expect Thailands beer

consumption to accelerate. Structurally, Thailand has the ingredients of a beer boom. We expect

6% growth in beer consumption. The urban population has some of the most favourable

demographics in the regions. Thai Beverage, the pre-eminent player, has a superb distribution

network that covers the best part of Thailand.

Thailand is just entering the income bracket (US$5000 per capita) where canned beer has

become viable. Canned beer should generate an improvement in FCF. The inventory burden

should be lighter.

Also, we see Thailand as a possible acquisition target for the major beer companies. The beer

majors are facing flat volume growth in the mature markets. A dynamic emerging markets

company such as Thai Beverage may be an ideal target. At the very least, the recent US$8 billion

acquisitions of Cerveza, the Mexican beer unit of Femsa by Heineken should lead to a

revaluation of San Miguel. That deal was priced at 11x EV/EBITDA which suggests that Thailand

is deeply undervalued. Thailand has similar fundamentals for beer growth to Mexico. In fact, Thai

Beverages dominance of Thailand is stronger than that of Cerveza in Mexico.

We are ahead of

consensus in 2012

Market is missing thebeer story and FCFgains from cans

Thai Beverage maybe revalued


33/60


33

Forecasts and Assumptions

Revenue Drivers

Our revenue drivers are derived with reference to assumptions on the overall status of the Thai

liquor industry. We assume that the Thai beer market will grow in line with GDP growth

expectations for that country. We believe spirit industry growth will trail GDP growth. As countries

become more prosperous, beer demand outstrips spirit demand.

Fig 37: Revenue Drivers (Macro)

FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E

Size of beer market - thousand hl 18,463 19,349 20,297 21,515 22,806 24,175

Beer market growth - Thailand 5.60% 4.80% 4.90% 6.00% 6.00% 6.00%

Size of spirit market - thousand cases 76,040 79,081 81,454 83,898 85,576 88,143

Spirit market growth - Thailand 4.5% 4.0% 3.0% 3.0% 2.0% 3.0%Source: The Company, Standard Chartered Research estimates

The company-specific drivers are shown below. We expect Thai Beverage to retain its 55%

market share. We estimate the Thai beer market to be 22 million hectolitres in 2010. There are

formidable entry barriers including licensing regulations. We expect sales volume growth to be in

line with the growth of the industry.

Fig 38: Revenue Drivers (Company)

Sales Volume Growth % FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E

Beer and Water

Beer 7.0 5.0 5.0 6.0 6.0 6.0

Drinking water 0.0 2.0 2.0 1.0 1.0 0.0

Soda water -2.0 0.0 0.0 2.0 2.0 2.0

Spirits

White spirits 3.0 2.0 2.0 2.0 1.0 1.0

Brown spirits 7.0 6.0 6.0 5.0 5.0 5.0


We expect ASPs of THB 47.50 for beer and water in the forecast period. Our ASP expectation for

spirits is THB 1,068 per case.

Cost Drivers

The basic cost structure is detailed below. Excise tax represents the most important cost item.

Fig 39: Beer Cost Structure

Operating Expenses

SG&A 22%

Excise Tax 57%

Packaging 14%

COGS Raw material 7%

Depreciation 2%

Labour 1%

Other 4%

Source: The Company, Standard Chartered Research

2.2 billion Litre market


34/60


34

We assume that the recent 27% excise tax will not be reviewed for another three years.

Generally, excise taxes are reviewed on a three year basis. In the cost assumptions table below,

we provide details of both cost of sales and operating expenses.

Fig 40: Cost Assumptions

Beer and water (in Bt per litre) FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E

Excise Tax 26.6 26.6 26.6 31.0 31.0 31.0

Packaging Material 5.9 7.0 7.0 7.0 7.0 7.0

Raw Material 3.3 3.3 2.6 2.6 2.6 2.6

Other 2.7 2.7 2.7 15.0 13.0 17.0

Spirits (in Bt per case)

Excise Tax 470.9 470.9 470.9 470.9 470.9 470.9

Packaging Material 72.3 79.5 79.5 79.5 79.5 79.5

Raw Material 45.5 45.5 45.5 45.5 45.5 45.5

Other 58.3 58.3 58.3 58.3 58.3 58.3


Profitability

Profitability should be driven by volume growth. We assume ASPs to be flat. The gross profit

growth is detailed below. The profitability variables should rise steadily at about 6% per annum.

The spirit business will provide the bulk of the profits. FY09 was a poor year for the beer

segment. The troubles in Thailand and the 27% increase in excise tax led to a THB 1.6 billion net

loss for the beer segment. The gross profit margin was 14%. The entirety of Thai Beverages

profits were from the spirits segment.

The beer losses were reduced in 1H10. The trajectory has improved. The company has adjusted

sales prices to cover the amount of the tax rise. We expect to see a return to beer profitability in

FY11 and FY12.

Fig 41: Profitability trend

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

2007 2008 2009 2010E 2011E 2012E

S$m

Operating prof it Pretax Prof it Net prof it


Working Capital

Our working capital assumptions are presented below. The operative factor is the fall in

inventory days, driven by the introduction of canned beer. At present, canned beer represents

just 19% of Thai Beverages volumes. The growing prosperity of the market should lead to morecans as a proportion of beer volumes. Cans are disposable and do not require a deposit.

Beer looks set torecover


35/60


35

We expect inventory days to fall from 87 in FY09 to 64 in FY12. In FY09, inventory days for the

beer segment were 40. The spirit segment is actually well in excess of 100. The gradual

introduction of canned beer should depress the inventory days for beer to below 40. This should

have a direct benefit for the overall cash conversion cycle, which we expect to compress from 79days to 56 days.

Fig 42: Working Capital Assumptions

2007 2008 2009 2010E 2011E 2012E

Accounts receivable days 7 5 7 7 7 7

Inventory days 97 101 87 80 72 64

Accounts payable days 13 16 15 15 15 15

Cash conversion cycle days 91 90 79 72 64 56Source: The Company, Standard Chartered Research estimates

Capex, dividends and financing plansWe have modelled Thai Beverages capex expectations in line with the companys guidance and

its recent history. The company has capital expenditure guidance of THB 4.7 billion in FY10 and

THB 2.6 billion in FY11. We expect capex to represent 3% of the companys sales in the forecast

period.

As the leading player industry in the Thai liquor industry (55% market share in beer), Thai

Beverages expansionary capex plans are limited. Instead, the bulk of the capex seems to involve

maintenance activities.

We expect the company to maintain a dividend payout ratio of 55 to 70% in the forecast period.

Despite the high dividend payout rate, the company should have a dividend cover of 1.9x. The

firm is unlikely to increase its debt because it is underleveraged. We also expect rising cashflowfrom operations.

FCF generation

We view the main benefit of the gradual introduction of cans as a steady rise in FCF generation.

The cash conversion cycle should contract and generate superior cashflow from operations. As

the capital expenditure expectations are just 2% of revenue, Thai Beverages FCF generation

should improve. We expect FCF CAGR of 12% in the forecast period.

Fig 43: Thai Beverage FCF

15,551

11,681

15,327

14,203

15,792

17,963

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

2007 2008 2009 2010E 2011E 2012E

Source: Bloomberg, Standard Chartered Research estimates

Falling inventory days

12% FCF CAGR


36/60


36

Risk Analysis

Government regulations

The foremost risk that Thai Beverage faces is government regulations, to which its earning are

vulnerable. Excise taxes are the largest part of Thai Beverages cost of sales.

The Thai government may increase excise taxes to buttress its fiscal position. Alcohol is one of

the leading sources of indirect taxation in that country. The latest excise tax increase in 2009 was

steep. It represented a 27% rise and had a severe impact on beer sales in 2009. Another rise in

the excise tax may have a devastating impact on beer sales.

Lack of Disclosure

The companys financial statements provide limited operating details. For instance, the sales

breakdown includes the absolute sales number in terms of some of the product segments.

However, details of the food business could be stronger.

There are other areas where the level of disclosure is poor. The company does not provide, in

our view, sufficient details of its hedging strategies, particularly the use of derivatives.

The poor level of disclosure increases the margin of error for our earnings forecasts. This means

that in projecting the companys earnings, it is necessary to take a leap of faith regarding the

operating details. These opaque operating data are far from satisfactory and make our forecasts

subject to qualification.

Conglomerate risk

Thai Beverage is a large conglomerate. Though the liquor business is the core of its operations,

there, are other businesses. They are active in the food business and non-alcoholic beverages.

There may be transfer pricing between different business segments.

Another risk associated with a family-held conglomerate is potential conflict within the controlling

family. The Charoen family founded Thai Beverage. They occupy many of the key management

positions. It is conceivable that conflicts within the family may derail the companys prospects.

Raw material prices

The beer and spirit businesses are susceptible to raw material prices. The main ingredient for

beer is barley. The main raw material for spirits is molasses. Both these commodities are at

historically high levels. A further increase in the prices of these commodities may seriously affect

the profitability of the liquor business. Thai Beverage is principally a price-taker of these inputs.

However, the risk of a raw material price rise is not as formidable as the risk of an excise tax rise.

Raw material prices represent just a quarter of Thai Beverages cost of sales.

Cans may be slow to take off

Canned beer is a relatively new concept in Thailand. It has only been oin the market since the

1990s, while bottled beer has a longer history. Though 19% of beer volume is canned, the core of

the market is bottled beer. As with all new products, there may some consumer resistance to

bottled beer. The market may not adopt bottled beer as quickly as our forecasts imply.

Excise tax may riseagain


37/60


37

All about Thai Beverage

Company Outline

Thai Beverage Public Company Limited (ThaiBev) is a beverage company. It is the largest liquor

company and brewer in Thailand. It has a 55% market share in beer. The Company operates

five segments: beer, spirits, non-alcoholic beverages, and food and alcohol. Beer includes

production and sales of branded beer products.

The Spirit business includes production and sales of branded spirit products. Non-alcoholic

beverages include production and sales of branded soda, water, ready-to-drink coffee, energy

drink, green tea and fruit juice flavour.

The food segment includes Japanese restaurants, bakery shops and distribution of food and

beverages. The Companys subsidiaries include International Beverage Holdings (UK) Limited,Best Spirits Company Limited, InterBev (Singapore) Limited, Blairmhor Limited, Inver House

Distillers Limited and Blairmhor Distillers Limited. In November, 2009, ThaiBev completed the

acquisition of Yunnan Yulinquan Liquor Co., Ltd. (source: Google Finance)

The following chart provides an outline of Thai Beverages operations

Fig 44: Thai Beverages Operations


Beer and spirits arethe core


38/60


38

Company History

The notable events in the Company's business are set out below:

Fig 45: Landmarks

October 1977 Acquisition of Sangsom Co.,Ltd. to produce Sangsom rum

May 1983 Successful bid for concessions offered by the Government to build and operate 12 distilleries in Thailand

April 1986 Spirit business was merged with Sura Maharasadorn Group

July 1988 Acquisition of Red Bull Distillery (1988) Co.,Ltd.

May 1994 Bang Ban brewery commenced operations

March 1995 Joint Venture between Carlsberg A/S and Chang Beer was launched in Thailand

July 1998 Acquisition of United Winery and Distillery Co.,Ltd

December 1998 Chang Beer became a market leader with approximately 54% market share of beer produced in Thailand

July 1999 Acquisition of Bang Ban brewery from joint venture with Carlsberg A/S

January 2000 Acquisition of 12 distilleries from the Government

October 2001 Kampaengphet brewery commenced operationsAugust 2002 Acquisition of Thai Alcohol Public Company Limited

October 2003 Thai Beverage was established as a holding company for all the subsidiaries

June 2004 Expansion of Kamphaengphet brewery commenced

May 2006 Thai Beverage successfully listed in the SGX-ST

October 2006 Acquisition of distillery assets from Sin Surang Karn Sura Co.,Ltd.

October 2006 Acquisition of PSUK, acquisition of BSHK

September 2007 Acquisition of United Products Company Limited and SPM Foods and Beverages Company Limited

January 2008 Acquisition of energy drink and ready-to-drink coffee assets from Wrangyer Beverage Company Limited

Sep-Nov 2008 Acquisition of 43.9% of Oishi in Sept; 89.9% following a tender offer in Nov, for a total cost of 6.24 billion Baht

September 2009 ThaiBev turned a new chapter in the history of "Beer Chang" under the one umbrella concept of "Kon Thai Hua JaiDeaw Gun"

November 2009 Acquisition of Yunnan Yulinquan Liquor Co., Ltd., Chinese white spirit distillery in ChinaDecember 2009 ThaiBev extended spirit product portfolio by launching Thailand's newest premium brandy, "Meridian V.S.O.P."

Source: The Company

The Management

The management is controlled by the Sirivadhanabhakdi family. They hold 67% of Thai Beverage.

The patriach of the family is the Executive Chairman Charoen Sirivadhanbhakdi. Mr. Charoen is

ranked by Forbes as the third richest man in Thailand, with a personal fortune of US$4.2 billion.

Mr. Charoen controls the day-to-day operations of the company.

Mr. Charoen rose from humble origins in Bangkok. He started off as a street vendor in Bangkok

selling beer and whisky. His privately held TCC Land owns Bangkok's famous tech-mall PantipPlaza. He also holds Hotel Plaza Athne in Bangkok and Manhattan, as well as hotels in Asia,

the U.S. and Australia.

Controlled by the thirdrichest man inThailand


39/60


39

Fig 46: Share price performance Fig 47: PER comparison

Thai Beverage PCL

0.16

0.18

0.20

0.22

0.24

0.26

0.28

0.30

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Thai Beverage PCL

Thai Beverage PCL

9

10

11

12

13

14

1516

17

18

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Thai Beverage PCL

Source: Bloomberg, Standard Chartered Research Source: Bloomberg, Standard Chartered Research


40/60


40

Financials

Fig 48: Income statement (THBm)

Year end: December 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E

Sales 90,126.3 92,091.2 97,797.9 105,107.9 105,452.4 107,969.2 107,793.3 111,663.0 115,127.8

Gross profit 26,523.1 28,947.7 28,472.8 31,283.5 30,126.2 31,359.7 33,695.9 35,511.5 33,093.0

EBIT 15,901.0 16,717.7 15,922.6 16,810.8 15,033.6 15,542.2 16,709.1 18,793.5 21,546.8

Interest Expense 1,740.3 1,595.4 1,568.7 1,050.2 680.9 548.6 1,181.2 1,081.3 1,040.1

Contrib. from new invts / acquisitions 0.0 0.0 23.7 50.8 552.5 11.2 330.6 363.7 0.0

PBT 14,160.7 15,122.3 14,377.7 15,811.4 14,905.1 15,004.8 15,858.5 18,075.8 20,506.7

Tax % 31.7 31.2 30.1 30.6 30.6 30.6 30.6 30.6 30.6

Earnings 10,417.5 10,409.4 10,054.8 10,628.2 10,341.9 10,566.4 11,001.0 12,539.2 14,225.5

EPS (THB) 0.47 0.47 0.42 0.42 0.41 0.42 0.50 0.57 0.65

DPS - net (THB) 0.12 0.24 0.23 0.29 0.30 0.33 0.26 0.30 0.34

Dividend cover (x) 3.9 2.0 1.8 1.5 1.4 1.3 1.9 1.9 1.9

Sales growth (%) -1.6 +2.2 +6.2 +7.5 +0.3 +2.4 -0.2 +3.6 +3.1

EBIT growth (%) +4.7 +5.1 -4.8 +5.6 -10.6 +3.4 +7.5 +12.5 +14.7

EPS growth (%) +50.4 -0.1 -10.7 +0.1 -2.7 +2.2 +18.8 +14.0 +13.4

DPS-net growth (%) +31.4 +100.0 -3.2 +24.9 +3.4 +10.0 -19.7 +14.0 +13.4


Fig 49: Balance sheet (THBm)

Year end: December 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E

FAs tangible 45,950.2 48,295.0 49,532.1 44,639.8 39,578.2 37,736.4 36,772.5 35,199.2 38,497.5

FAs intangible 233.6 262.2 355.4 1,007.1 3,178.3 3,311.4 3,311.4 3,311.4 3,311.4

Other LT Assets 1,389.9 255.6 2,156.3 2,390.1 2,360.9 2,614.4 2,614.4 2,614.4 2,614.4

Total LT Assets 47,573.7 48,812.8 52,043.9 48,037.0 45,117.3 43,662.2 42,698.3 41,125.0 44,423.3

Inventories 30,737.9 26,034.7 28,315.2 28,277.7 29,729.4 26,203.9 23,954.1 22,332.6 20,467.2

Receivables 840.6 400.6 1,317.9 1,956.5 1,514.4 2,050.4 2,047.0 2,120.5 2,186.3

Cash & equivalents 887.5 3,260.7 1,923.9 2,702.0 1,930.1 2,594.0 9,178.5 16,577.4 25,495.4

Other current assets 9,0

asia pac food bev

Documents