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3 Beaten-Down Blue-Chip Stocks That May Become Future Stars

As of the end of last month, most of the companies had reported their financial results.

During the earnings season, I was keeping a close watch on three companies part of the Straits Times Index (SGX: ^STI). Even though their stock prices have been hit over the last few years, these companies could go on to perform well in the future.

I have laid out the reasons for my optimism on these firms in a three-part series. The first company can be found here and the second one here. The third company is discussed below.

Company #3: Thai Beverage Public Company Limited (SGX: Y92)

Thai Beverage is a prominent beverage company in Southeast Asia, and is the largest of its kind in Thailand.

I like the company for its top-notch beverage brands, its extensive distribution network, its international presence in more than 90 countries, and its growth potential for the future.

Thai Beverage has ambitions to become the largest and most profitable beverage company in Southeast Asia by 2020. However, in its latest third quarter, there were some short-term stumbles. While revenue rose 34% year-on-year, profit attributable to shareholders tumbled 61%. One of the factors that contributed to the fall in profit attributable to shareholders was the lower earnings recorded by its spirits and beer businesses. These two businesses are also the largest contributors to the company’s revenue and profit.

Another factor is Thai Beverage’s weak balance sheet. As of 30 June 2018, the company had THB 235.3 billion in total debt, and THB 13.0 billion in cash and cash equivalents, translating to a net debt position of THB 222.2 billion. The net-debt-to-equity ratio, thus, was 1.79, which looks high to me.

Today, I’m on the side-lines as I look for Thai Beverage’s balance sheet to strengthen. At the same time, I would like to see some signs that the company can grow its bottom line. When these happen, I might be keen to take a sip of the company.

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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 Sudhan P doesn’t own shares in any companies mentioned.