How Thai Beverage Public Company Limited Makes Its Money

Thailand-based Thai Beverage Public Company Limited (SGX: Y92) is one of the largest food and beverage players listed in Singapore.

It listed on May 2006 and closed at a price of S$0.27 per share on its debut trading day. After slightly over 10 years, the company’s shares are today worth S$0.94 each and Thai Beverage has a hefty market capitalisation of S$23.4 billion.

The company’s share price gains have come together with commensurate profit growth. From 2005 to 2015, Thai Beverage’s profit has compounded at an annual rate of 9.9%, rising from 10.37 billion baht to 26.46 billion baht.

Let’s take a closer look at how exactly the company makes its money. Knowing this can give investors better understanding of the risks the company is facing and the opportunities it has when it comes to growing its business in the future.

Sources of Thai Beverage’s profit

Over the past decade, Thai Beverage has been diversifying its business to include more non-alcoholic drinks and food; the company initially had a heavy focus on spirits and beer.

That said, spirits and beer products continue to dominate Thai Beverage’s business. Here’s a breakdown of the company’s net profit in the first-half of 2016 by its various business segments:

Source: Thai Beverage earnings report

The company made 13.1 billion baht in profit (excluding contributions from Fraser and Neave Limited (SGX: F99) and Frasers Centrepoint Ltd (SGX: TQ5)) in the first-half of 2016. The Spirits segment contributed the lion’s share at 83%. Some of the segment’s products include the brown spirit brand Hong Thong and the white spirit brand Ruang Khao.

Meanwhile, the Beer segment provided 19% of net profit and this is where the company’s Chang Classic brand of beer resides. Last year, the company embarked on a rebranding campaign, whereby its various beer products were consolidated into a single Chang Classic brand.

The Food business segment is mainly driven by its Oishi brand of Japanese cuisine restaurants. Lastly, the Non-Alcoholic Drinks segment has products such as bottled water, sodas, and teas etc.

Foolish Conclusion

It’s understandable to see Thai Beverage as primarily an alcohol company since alcoholic beverages make up 94% of the company’s profit in the first-half of 2016.

In any case, Thai Beverage has continued to grow its business. In the first-half of 2016, the company’s net profit grew by 24.5% from a year ago if we exclude contributions from F&N and Frasers Centrepoint. If the two Fraser entities are included, Thai Beverage’s net profit still managed to climb by 16%.

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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 does not own shares in any companies mentioned.