Why Has Thai Beverage Public Company Limited’s Share Price Declined By 18% Over The Last Month?

Over the past month, Thai Beverage Public Company Limited’s (SGX: Y92) share price has fallen by 18% to S$0.62 currently. In the same period, Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI), has fallen by just 2.9%.

As a quick introduction, Thai Beverage is a Thailand-based company with four self-explanatory business segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages. Let’s  try to understand the cause of the sharp decline in Thai Beverage’s share price.

Reasons for a decline

There can be many reasons behind a stock’s price decline. But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related.

The former deals with how a stock’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock’s profits.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The case with Thai Beverage

In Thai Beverage, I believe the former was the main culprit. On 14 August 2018, the company released its earnings update for the third quarter of its fiscal year ending 30 September 2018 (FY2018). The reporting period was for the three months ended 30 June 2018. The table below shows the year-on-year changes for some important financial numbers from Thai Beverage’s income statement for the third quarter of FY2018:

Source: Thai Beverage FY2018 third quarter earnings presentation

We can see that Thai Beverage’s EBITDA (earnings before interest, taxes, depreciation, and amortisation), net profit, EPS (earnings per share), and attributable profit all fell compared to a year ago. Even when one-off gains and expenses were stripped away, the performance was not pretty, as net profit, EPS, and attributable profit declined as well. (The smaller percentage declines in the tables above are for the year-on-year changes after adjusting for non-recurring gains and expenses.)

Thai Beverage’s weak performance was driven by lower profitability across all its business segments except for Beer. Furthermore, Thai Beverage saw its balance sheet deteriorate significantly in the reporting quarter on a year-on-year basis. In the third quarter of FY2018, Thai Beverage had THB 13.03 billion in cash and equivalents, and THB 235.28 billion in debt; the company ended the third quarter of FY2017 with THB 3.89 billion in cash and equivalents, and THB 42.36 billion in debt.

With a decline in profitability and a weakening of a balance sheet, it seems likely that Thai Beverage’s share price had declined over the past month due to these reasons.

What’s next

Going forward, Thai Beverage will need to demonstrate that it can improve the performance of its various businesses.

Furthermore, investors will need to pay attention to the value that Thai Beverage can extract from its latest acquisitions (such as Saigon Beer in Vietnam, and a chain of KFC restaurants in Thailand), and the company’s ability to reduce its debt over time.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.