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Thai Beverage Public Company Limited’s Stock Is Down 25% In The Last 12 Months: Is It A Good Business?

Thai Beverage Public Company Limited (SGX: Y92) is a company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages.

In the last 12 months, Thai Beverage’s stock price is down by about 25% to S$0.70 (as of writing). This captured my attention and got me interested in finding out more about the company. In particular, I want to understand: Does it have a high quality business?

This question is important. If Thai Beverage has a high quality business, its current low stock price could be an investment opportunity. Unfortunately, there’s no easy answer to the question. But, a simple metric can help shed some light on the question: The return on invested capital (ROIC).

A brief introduction to the ROIC

In a previous article, we explained how the ROIC can be used to evaluate the quality of a business.

The simple idea behind the ROIC is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs while the reverse is true – a low ROIC is often associated with a low-quality business.

You can see how the math works for the ROIC in the formula above.

Thai Beverage’s ROIC

The table below shows how Thai Beverage’s ROIC looks like. I had used numbers from its fiscal year ended 30 September 2018 (FY2018).

Source: Thai Beverage’s Financial Statement

In FY2018, Thai Beverage generated a ROIC of 26.5%. This means that for every THB 1 of capital invested in the business, Thai Beverage earned THB 0.265 in profit. The company’s ROIC of 26.5% is above the average, based on the ROICs of many other companies I have studied in the past. This suggests that Thai Beverage has a high quality business. 

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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.