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Foolish Face-off: Thai Beverage vs. SABMiller

DuelHave you ever wondered how our locally-listed companies would fare in face-off with foreign competitors? Wonder no more, as we bring you the first in a new series of articles that quickly look at how our local companies stack up against comparable foreign counterparts.

So, let’s not waste any more time as we introduce our first pair of contestants. They are international brewers Thai Beverage (SGX: Y92) and SABMiller (NASDAQ: SBMRY.US)(LSE: SAB).

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Thai Beverage, as the name suggests, hails from Thailand, which is also known as the Land of a Thousand Smiles. The company sold almost 1.2 billion litres of alcoholic beverages in 2011 and counts Chang, which sponsor Everton Football Club, as one of its many brands. It is a component of Singapore’s flagship stock market index, the Straits Times Index (SGX: ^STI)

SABMiller is based in the USA but trades on the London and Johannesburg Stock Exchanges. The company, which is a constituent of the FTSE 100 index, runs over 104 breweries worldwide. It produced about 23 billion litres of beer in 2011.

Thai Beverage SABMiller
Market Cap S$15.7b S$104b
Last 12 Month Sales S$6.43b S$21b

Round 1: Valuation

In our first round of the Foolish Face-off, let’s compare the valuations of the two companies using Price-to-Earnings, Price-to-Sales (PS) and Dividend Yield.

Thai Beverage SABMiller
PE 13.8 19.9
PS 2.4 4.9
Dividend Yield 2.7% 2.1%
Share Price $0.62 3,464p

We can see that SABMiller shares trade at a higher premium than Thai Beverage in terms of its PE and PS ratios. Thai Beverage’s shares also offer a better dividend yield than SAB Miller’s – 2.7% versus 2.1%. So, I’m going to award Round 1 to Thai Beverage due to its more attractive valuations.

Winner: Thai Beverage

Round 2: Profitability

In Round 2, we look at profit margins as well as return on equity. Profit margins can tell us how well management is turning each dollar of sale into profits. Meanwhile, a higher return on equity (ROE) could indicate how efficiently the company can turn shareholder capital into profit. Generally, the higher the ROE the more efficient the company.

Thai Beverage SABMiller
Gross Margins 28.2% 69.0%
Net Margins 17.9% 25.6%
Returns on Equity 33.8% 17.7%
*Based on last twelve month’s financial   figures

SABMiller’s profit margins are significantly higher than Thai Beverage’s. However, the American brewer loses out on the return on equity measure. Because of SABMiller’s better showing in two categories, it takes Round 2.

Winner: SABMiller

Round 3: Growth

We now turn our attention to how shareholders might have benefitted from the companies’ business performances by looking at some important growth elements. Revenue and profit growth, over time, should improve the intrinsic value of the business while dividend increases might point to improving shareholder returns.

Thai Beverage SABMiller
Revenue Growth CAGR 8.7% -2.8%
Profit Growth CAGR 25.9% 15.8%
Dividend Growth CAGR 6.4% 9.3%
*Based on financial figures from the   companies’ last five completed financial years

Thai Beverage wins this bout with its better revenue and profit growth. It is not too bad at returning capital to shareholders, too. So, Round 3 to Thai Beverage.

Winner: Thai Beverage

Foolish Bottom Line

Final Score: 2-1 to Thai Beverage!

It seems, from a cursory glance at the two companies that Thai Beverage just edges it. It is slightly cheaper and it has shown a better track record of growth. A notable drawback, though, is its lower profit margins. However, that is offset by its better return on equity.

It is worth noting we have not delved into other important factors about the business, such as its competitive advantages and capital structure. These are important considerations before we can arrive at a definitive conclusion.

If you would like to know more about other businesses, stay tuned as we bring you more Foolish Face-offs later on.

Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead. 

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any companies mentioned.