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2 Reasons Behind Thai Beverage Public Company Limited’s Success

Thai Beverage Public Company Limited (SGX: Y92) is one stock that has done really well since its listing. The spirits distiller and beer brewer had its initial public offering (IPO) on 30 May 2006 and over the past 10-plus years, its shares have gained 293% to S$0.915 in price alone.

Those share price gains did not come in a vacuum: Thai Bev’s business has showed steady growth since its listing. From 2006 to 2015, the company’s revenue has increased at a compound annual growth rate of 6.5% from THB97.8 billion to THB172.4 billion. Meanwhile, its profit has jumped by 11.4% per year from THB10.1 billion to THB26.5 billion.

What might have been behind Thai Beverage’s success? Let’s look at some possible factors.

1. Ability to improve product suite to drive growth

Thai Bev has showed an ability to constantly improve its product suite.

One example is its August 2015 relaunch of its Chang brand of beer. The success of the relaunch could be seen in how the beer segment’s revenue and profit had jumped by 71% and 175%, respectively, in the first-quarter of 2016.

It’s worth noting though, that there were other forces at play that could have played a part too in the beer segment’s strong growth. Thai Bev said the following in its 2016 first-quarter earnings release:

“In the middle of the first quarter this year, Excise Department increased tobacco tax, resulted in the anticipation for increasing alcoholic beverage excise tax in the near future. The stock up of inventory by agents caused the positive impact on alcoholic beverage industry’s performance amidst the stagnant economy.”

Put another way, it appears that fears of higher alcohol taxes in the future had led to higher inventory-stock up for Thai Bev’s agents.

2. Diversification

Besides manufacturing and distributing spirits and beer, Thai Bev also has businesses in non-alcoholic beverages and snacks. In 2015, 87% of the company’s revenue had come from the spirits and beer segments. Having diversification could help Thai Bev achieve a more stable business.

It’s worth noting that under Thai Bev’s Vision 2020 strategic roadmap, the company has a goal of increasing revenue contribution from non-alcoholic beverages to “over 50%” of its total revenue.

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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 contributor Ong Kai Kiat doesn’t own shares in any companies mentioned.