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Would Benjamin Graham Buy Thai Beverage Public Company Limited?

Ser Jing - Thai Beverage First Quarter Results, Weighed Down by Acquisitions (pic)

Thai Beverage (SGX: Y92), which is the company behind Chang beer and Sang Som rum, is also Thailand’s largest and one of South-East Asia’s most prominent beverage companies.

Having outperformed the other components of the Straits Times Index in August, thanks to share price gains of more than 15%, how does Thai Beverage figure as a Benjamin Graham value share?

Thai Beverage is valued at 20 times earnings. So, the earnings yield of 5% could entice Graham in his search for an earnings yield of twice the risk-free rate of return. With a dividend yield of 2.4%, Thai Beverage also matches the payout of a high-grade bond such as the US 10-year Treasury.

In spite of offering the returns we are looking for, Thai Beverage may still seem quite expensive to some value investors. The dear nature of Thai Beverage is highlighted by its price-to-book ratio of almost four, which is some way off the two-thirds that a strict value investor, such as Benjamin Graham, would insist on.

Whilst Thai Beverage is certainly not a risk-free investment, the company appears to have a manageable level of debt with total debt standing some 40% below the book value. The current ratio of around two that Benjamin Graham would be hoping for, suggests that Thai Beverage is in a strong financial position.

However, the argument is this: If we can achieve the same returns “risk free”, why would we want to take on the added risk of investing in Thai Beverage? With a current earnings multiple of 20, Thai Beverage might be a bit too expensive at present for devout value investors.