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ThaiBev Loses Its Fizz

Ser Jing - Thai Beverage First Quarter Results, Weighed Down by Acquisitions (pic)There is probably only one thing worse than a bottle of flat beer and that is two bottles of flat beer.

No, I stand corrected. As an investor, probably the one thing that could be worse than a bottle of flat beer is when shares in the beer maker lose their fizz.

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That is precisely what has happened to shares in Thai Beverage Company (SGX: Y92), which have fallen 8% from their recent high of S$0.71 to $0.65.

What, you may ask, could have caused S$1.5b to be wiped off the value of Singapore’s largest brewer since 22 May?

The answer is nothing. That is unless you consider the assigning of a “stable” outlook for its corporate bonds to be reason enough to knock its shares off a 52-week high.

The thing to remember is that the share make is an auction market. When there are more buyers than sellers, shares tend to rise. However, when there are more sellers than buyers, shares tend to fall.

It really is that simple.

However, if you believe that the beer maker may have lost its defensive qualities, then that might be a reason to bail out. Then again, if you believe that its valuation may be a tad rich, then that might also be a good reason to sit on our hands.

But let’s not forget that ThaiBev is one of Singapore’s most efficient blue chips. It generated $35 profit for every $100 of shareholder equity in the business. Of course, it has taken on a fair bit of debt to achieve that. So that might be a point to consider.

However, with interest rates likely to remain low for some time, and ThaiBev’s 2.7% dividend yield as a cushion, it might be a good time to run the slide rule over the shares again now.

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