• Bloomberg


Thai Beverage PLC has earned the title of the world’s “cheapest alcohol” pick at Goldman Sachs, with the Bangkok-based brewer now the worst performer in its consumer stocks coverage, although analysts say a turnaround in its operations next year will give the stock a nice lift.

Since losing 7.3 billion Singapore dollars ($5.3 billion) this year, ThaiBev now trades at 14.9 times future earnings — below its 10-year average — while the MSCI World Beverages Index trades at 20.1 times, according to compiled data.

“The stock has reached its bottom, both on earnings and valuation,” June Zhu and Manik Mahajan, analysts at Goldman Sachs (Singapore) Pte wrote in a report last week. “FY19 will mark the start of the turnaround” due to forecast improvements in farm incomes, wages and election spending.

The company’s management is anticipating that higher agricultural income in Thailand and a strategy to replace short-term debt with long-term loans will improve finances next year.

Sanford C. Bernstein analysts Euan McLeish and Yan Li upgraded the stock from underperform to market-perform Friday, saying the stock’s valuation “now fairly reflects the weak domestic outlook and the lack of upside from the recent acquisitions.”

Goldman’s Zhu, who last week reiterated her buy rating on the stock from July 30, says investors should monitor the company’s progress on sales volume, revenue growth at its Vietnamese unit, cost controls and debt management. Even so, she cut the target price to SG$0.74 from SG$0.94 on Wednesday, citing a lack of visibility for the next six months.

Of 16 analysts covering the stock, only two brokerages have sell-equivalent ratings. Phillip Capital, which has a reduce rating, said on Aug. 17 that it’s still worried that weak disposable income might continue to weigh on prospects. JPMorgan’s Kae Pornpunnarath has an underweight rating.

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