Why Has Thai Beverage Public Company Limited’s Stock Price Fallen By 12% In A Month?
Thai Beverage Public Company Limited (SGX: Y92) is a company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages.
On 14 February 2018, the company’s stock price closed at S$0.91. Today, a month later, Thai Beverage’s shares are trading at S$0.805 apiece, which represents a decline of 11.5%. What may have caused this?
Reasons for a decline
There can be many reasons behind a stock’s price decline. But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related.
The former deals with how a stock’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock’s profits.
Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.
The case with Thai Beverage
In Thai Beverage’s case, I believe it’s the former at work. The table below shows some important items from the spirits distiller’s latest quarterly earnings update for the first quarter of its fiscal year ending 30 September 2018 (FY2018):
Source: Thai Beverage FY2018 first quarter earnings presentation
We can see that Thai Beverage’s revenue, EBITDA (earnings before interest, taxes, depreciation, and amortisation), net profit, adjusted net profit, EPS (earnings per share), and adjusted EPS all came in lower compared to the same quarter a year ago.
The company’s declines were driven by negative performances in its Spirits and Beer segments, partially offset by growth in the Food and Non-Alcoholic Beverages segments. Furthermore, Thai Beverage also saw its balance sheet deteriorate during the reporting quarter, with its net debt position increasing significantly from THB 30.7 billion in the previous sequential quarter to THB 213.0 billion.
So, it’s clear that the company’s business performance has been poor of late, and the recent share price decline could be a reflection of this.
Going forward, I think Thai Beverage will need to demonstrate sustained improvements in the performances of its two biggest segments: Spirits and Beer. Furthermore, investors will also need to pay attention to whether there is any value that Thai Beverage can gain from its latest acquisitions, such as the blockbuster Saigon Beer deal in Vietnam (which resulted in the big jump in debt), and a chain of over 250 KFC restaurants in Thailand. Another area to keep an eye on is the company’s ability to reduce its debt over time.