ThaiBev – Profit taking on FNN news (potentially -ve)


THBEV +23% although -25% in past 8-days; Combo of Short Covering & Retail Buying after FNN was on Trading Halt; Mkt was expecting clarity over FNN Property & F&B spin-off but in fact turned out to be related to a Myanmar brewery dispute; FNN spin-off is a +VE for THBEV given F&B synergies; Note THBEV hammered y’day on talk of a possible alcohol tax in Thai; 97% of THBEV NP comes from alcohol which is mainly from spirits (costs easily passed to consumer) whilst beer biz is loss making


Business Times reported FRASER and Neave’s (F&N) joint venture partner in Myanmar Brewery Ltd (MBL) is trying to oust the conglomerate from the partners’ promising beer-making business, F&N said yesterday.

Myanma Economic Holdings Ltd (MEHL), which holds 45 per cent of Myanmar Brewery, has informed F&N that it plans to begin arbitration proceedings to claim F&N’s 55 per cent stake in the brewery, based on Myanma Economic’s reading of the joint venture agreement.

Comments :
** this potentially can be very negative for FNN’s F&B biz as Myanmar Brewery contributed 72% of FNN’s berverage earnings…. which in turn may impact how THBEV will look at its structure and synergy with FNN in the future.


Morning Wrap by broker – 30 Aug 13

Baltic Dry: 1136 -0.87% Gold: 1405.67 -0.54% Palm Crude: 2440 -1.65%
VIX: 16.81 +1.94% WTI Crude: 106.99 -1.66% USD/SGD: 1.2758 +0.04%

*(OLAM): 4Q13 NP of $56.8m -48%YoY was below reuters est.($75.4m), hit by increased tax charges of $50.6m, compared to a net tax credit of $8.2m a yr ago & amid challenging mkt conditions.

*China Minzhong(MINZ) unaudited FY13 #s: NP of RMB 755.1m (US$123.4m) +11%YoY while REV +26.4%YoY; says vegetable demand remains healthy but provided no fcst for period under review. Currently MINZ is preparing a response to Glaucus’s claim that it has deceived regulators & investors, by end of the wk.

*(FNN) in beer spat with Myanmar partner (MEHL); plans to start arbitration proceedings over the co.’s stake of 55% in Myanmar Brewery. Outcome likely to be watched as losing the stake would mean the exit from one of Asia’s fastest-growing beer mkts. **Trading to resume today

*(NOBL) wins court order to liquidate Ebullio Commodity Master Fund after latter failed to pay it ~$4.9m for contract breaches.

*Wilmar(WIL) signs agreement to supply raw sugar to Algeria’s Cevital.

*(GLP) signed expansion agreements of 21,000 sqm in China.

*(MIDAS) unit secures syndicated loan facility of RMB 1.16b for 9-yr tenure.

(BMP) Moody’s: ThaiBev to benefit from Fraser & Neave spin-off p lan

Moody’s: ThaiBev to benefit from Fraser & Neave spin-off plan
2013-08-29 04:41:04.588 GMT

Hong Kong, August 29, 2013 — Moody’s Investors Service says that Thai Beverage Public Company Ltd’s (Baa3, stable) credit profile will benefit from Fraser & Neave’s (F&N, unrated) proposal to spin off its property business.

F&N — which is 28.61% owned by ThaiBev and 61.67% by TCC Assets — will separate its real estate division from its core food & beverage business through a listing in November or December 2013.

Moody’s believes the spin-off will facilitate moves by ThaiBev to better leverage revenue and cost synergies with F&N’s food & beverage business, while the latter — in the absence of its property business — can better focus on expanding.

Moody’s further believes that the proposed spin-off shows that TCC Assets seeks to more closely integrate, where possible, the operations of ThaiBev and F&N.

“We believe the latest development shows that ThaiBev and TCC Assets seek to maximize synergies between ThaiBev and F&N’s core businesses, including leveraging each other’s regional distributional networks, product development capabilities, and portfolio of leading beverage brands ,” says Annalisa DiChiara, a Moody’s Vice President and Senior Analyst.

“Given that TCC Assets has notified F&N that it will vote in favor of the spin-off and in view of senior management restructuring at F&N for the purposes of a more dedicated focus on growing the food & beverage business, we expect TCC Assets to continue supporting additional restructuring to most efficiently integrate the two companies’ food & beverage businesses. This may even include their full consolidation over time,” adds DiChiara.

“Previously, we raised concerns over the lack of clarity in regard to shareholder intentions. But now we see that the aim is to better align ThaiBev and F&N in their growth strategies and business opportunities.
And while we cannot at this stage quantify the benefits, we believe that ThaiBev will strengthen its competitive and financial positions over time”, adds DiChiara.

Assuming all regulatory and shareholder approvals are obtained, the listing of F&N’s property unit, Frasers Centrepoint Limited (FCL, unrated), will be achieved via a dividend in-specie distribution of FCL shares to F&N shareholders. As a result, ThaiBev will receive, at no cost, two FCL shares for every one F&N share it owns.

After the completion of the proposed transaction, F&N will no longer have any interest in FCL, leaving the Asian conglomerate with its food and beverage business (84% of sales) and printing and publishing businesses (16% of sales).

F&N and FCL will trade separately on the Singapore Exchange upon the listing of FCL.

Further, on August 28, ThaiBev also announced the appointment of a financial advisor to conduct a strategic review to consider various options, including the viability of retaining or exchanging its interests in the F&N group and other possible ownership structures.

The principal methodology used in this rating was the Global Alcoholic Beverage Rating Methodology published in September 2009. Please see the Credit Policy page on for a copy of this methodology.

Thai Beverage Public Company Ltd is the leading beverages producer in Thailand. It operates four business lines: spirits, beer, non-alcoholic beverages and food. ThaiBev was listed on the Singapore Exchange in 2006.

Annalisa Di Chiara
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service Hong Kong Ltd.

Airasia Msia – Worthwhile to take a look?

Airasia, along with the rest of the stocks in ASEAN have seen a big correction in their share prices due to the ongoing concern of an earlier than expected QE tapering as well as the Syria’s military intervention by the US and its allies. We have seen a deep 30% plunge in its share price against its recent peak in late May (just before the huge outflows seen in the month of June, which wiped out billions of dollars from the EMs).


Peers comparison also puts Airasia at the top, with an undemanding 10x P/E against the industry average of ~30x. ROE seems to average out around 20-30x since 2004 except 2008 (-ROE due to the losses it incurred), which was an exceptionally bad year during the european crisis.

AIRA Peers

Some of the risks include the volatility in crude oil prices due to the turmoil in Syria as well as the continual depreciation of the ringgit, which may eat into its bottom line. (not vested)

Morning Wrap by Decoder – 29 Aug 13

• CN/HK – Tax reform to support frugality call, pollution fight. Finance minister Lou told members of the National People Congress on Wednesday that the ministry is considering to widen the scope of its consumption tax to include more luxury goods. Though the officials didn’t specify what kinds of items would be included, cigarettes/alcohol/high end watches/jewelries are the likely targets. This plan is expected to push makers of these luxury products to expand into other mid markets to make up for the falling sales. In addition, a consumption tax will also be imposed on products that could cause severe environmental pollution and over-exploitation of resources. To make things worse, resources tax on coal based prices instead of sales volume will hit the sector further as their bottom lines get affected. –

• Markets post steady gains throughout the day till the last 30 mins of trading, where the sellers came onboard with vengeance and push the indices to close in the mid range. Next week’s job data might have kept some investors off the markets and as we approach Sept, anxiety starts to build up. This is due to the speculations that the QE tapering might come in as early as Sept and investors are watching out for the exact date to hit the Sell button. Energy sector spiked yesterday with the crude hitting 2 years high as the tension in Syria escalates. At this moment, US and its NATO allies are in talks for a military intervention in Syria over the use of chemical weapons on innocents civilians. Bonds fell for the first time in 4 sessions and a 35bn 5 yrs bond auction saw the smallest demand since July 2009 with yield as high as 1.624%.

• Over in Asia, currencies are plunging and stock markets are under pressure in the EMs, including India/Indo/Brasil/South Africa/Turkey. Roach, an economist, said that all these countries have sizeable deficits that have long benefited from the capital inflows attributable to the QE and once that gets turn off, these big current account deficits are going to get funding issues. This might eventually lead to further depreciation of the currencies in these countries.

Market Wrap by Broker – 29 Aug 13

Baltic Dry: 1146 -1.97% Gold: 1417.27 -0.41% Palm Crude: 2481 +1.18%
VIX: 16.49 -1.67% WTI Crude: 109.68 -0.38% USD/SGD: 1.2757 +0.49%
Trading Halt: Ezion Hldgs(EZI.SP) pending announcement, which could be related to order wins.

*China Minzhong(MINZ) calls for extension of trading halt to 5PM on Aug 30 as it delays earnings release to this evening; Refutes Glaucus allegations, says most of issues raised by them were “nothing new & arose out of a complete lack of understanding” of co.’s business model as well as the operating environment in China. Co. to release response by end of the week.

*First REIT(FIRT) secures 4-yr S$92m fixed-rate transferable term loan from OCBC for refinancing outstanding loans; no short-term refinancing needs until 2016.

*SembIndus(SCI) announced extension of its wastewater treatment business in China’s Liaoning province to 2 new sites.

*Tat Hong(TAT), Intraco(INTR) in JV to focus on Myanmar crane, excavator mkt.

*Blumont Group(BLUM) boosts exposure to Uranium sector via Azarga Resources.

*United Envirotech(UENV) won bid for RMB 90m project to upgrade industrial water treatment plant.

*Novo Group(NOVO) expects to report increase in loss for 1Q on decrease in rev of trading business.

*Sin Heng Heavy(SHHM) FY13 #s: NP $13.76 +47.4%YoY, REV +44.3%YoY on back of broad-based improvement across geographical mkts & biz segments; plans final div of 0.45cps, continues to expand in new mkts.

*ASL Marine(ASL) 4Q13 #s: NP $15.2m +83.3%YoY on REV of $149.5m +27.8%YoY & further boosting its FY #s where NP +40%YoY due to strong increase in REV, further strengthened by an increase in gross profit margin across all segments, & partially mitigated by an increase in admin expenses.

Asia macro – Time for a ‘reality check’ by Standchart

• Talk of Asia being in a 1997-98-style crisis dramatically overstates the risks

• Fundamental indicators actually suggest a pick-up, not a slowdown in H2-2013 growth

• India’s external situation is not as precarious as it was in 1991

• AXJ currencies to fall further near-term, but to recover in Q4 when China stabilises Summary Talk of recent market declines being reminiscent of the 1997-98 Asian crisis is, in our view, very overdone. The implication of such thinking is that Asian economies could be heading for a collapse and outright recessions. We absolutely disagree with such a view. In fact, we think that emerging market (EM) economies in general and Asia ex-Japan (AXJ) in particular are likely to see moderately faster growth in H2 this year compared with H1, helped by better growth in the US and some stabilisation in Europe. The fundamental differences between now and 1997-98 are significant on any metric, most notably the current-account (C/A) balance, short-term external debt and foreign-exchange reserves. We expect the AXJ region to remain a growth outperformer in most scenarios other than a huge downturn in the global economy.

Recent market moves are not unique and small relative to the Asian crisis. The India rupee (INR), which is down 17.2% against the US dollar (USD) since April, has made three similar moves in recent years: 2008 (April-December: 17.5%), 2011 (August-December: 16.9%) and 2012 (March-June: 11.5%). However, the market was distracted then by the US (2008-09) and euro-area (2011 and 2012) crises. With European tensions abating, the assumption is that EMs are in crisis – for lack of something else to focus on; Fed QE tapering expectations do not seem to be a dramatic enough reason. We view calls that AXJ is hugely over-indebted as exaggerated. As our SCout, 1 July 2013, ‘Asia leverage uncovered’ showed, there are pockets of concern in some countries, but overall debt levels are manageable. In fact, there is room to boost household leverage in China, India and Indonesia.