Thai Beverage Public Company Limited (SGX: Y92) is a company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages. Year-to-date, Thai Beverage’s stock price is down by around 35%. In this article, we will try to understand what might have caused the decline.
Reasons for decline
There are many reasons that cause a stock price to move. Generally, stock price movement is driven either by business performance or investors’ sentiments.
The former is related to how a business performs in a given period, looking at metrics like growth, margins, production and others. Here, the ultimate driver is profit.
The latter is driven more by investors’ overall mood, which is described by emotional pairs such as greed and fear, optimistic and pessimistic, bull and bear, etc.
In this case of Thai Beverage, I believe the former was the main culprit causing the decline in share price.
Source: Thai Beverage Results Presentation
The above is a slide from Thai Beverage’s 2018 full year results presentation.
What we can see from the above table is that with the exception of revenue, all metrics came in weaker as compared to last year.
The lower attributable profit (-46.3% year-on-year) was due to lower profits across all segments (with the exception of the Food segment), though revenue was higher as a result of acquisitions.
Furthermore, Thai Beverage also saw its balance sheet deteriorate during in the latest financial year. As at 30 September 2018, it had cash and cash equivalents of THB 22.5 billion and total borrowings of THB 231.3 billion. This gives a net debt position of THB 208.8 billion, up from the THB 30.7 billion recorded on 30 September 2017.
Last but not the least, Thai Beverage’s total dividend per share for FY2018 was THB 0.39. This was down from THB 0.67 dividend per share paid in FY2017.
Putting all factors together, the company’s share price has reacted “accordingly” to reflect the weaker numbers.
Going forward, the company will need to demonstrate that it can improve the performance of its businesses. Furthermore, investors will also need to pay attention to the value that Thai Beverage can extract from its latest acquisitions (such as Saigon Beer in Vietnam and KFC in Thailand) and its ability to reduce its debt over time.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
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.