Thai Beverage Public Company Limited (SGX: Y92) operates in four different segments, namely spirits, beer, food, and non-alcoholic beverages, and last week, Thai Beverage’s share price was up by about 15%. Let’s try to understand what might have caused the surge.
Why the surge?
There are many reasons for a stock price to move. Generally, stock-price movement is driven by changes in either business performance or investor sentiment.
The former is related to how a business performs in a given period, looking at metrics like growth, margin, 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, optimism and pessimism, bullish and bearish sentiment, etc.
In the case of Thai Beverage, I believe the former was the main culprit causing the most recent surge in share price.
Let’s look at a slide from Thai Beverage’s latest results presentation to see why that might be the case.
Source: Thai Beverage Result Presentation
After a rough year in 2018, Thai Beverage’s fortunes seem to have turned around in the first quarter of 2019. What we can see from the above slide is that all metrics came in stronger when compared to the same period last year, which is a significant contrast to the prior-year performance.
The stronger revenue was driven by higher volume across all segments, as well as by the consolidation of new acquisitions. In particular, the spirits and food segments delivered commendable top- and bottom-line performance for the quarter. The former saw its net profit up by 41.5%, while the latter reported an 11.5% rise in net profit.
For the quarter, Thai Beverage benefitted from the improvement in economy driven by the tourism sector and a rise in private consumption. It expects the campaigns ahead of the coming election in March 2019 to further stimulate the economy.
Putting all of these factors together, the company’s share price has reacted positively to reflect the improvement in fundamentals.
The company will need to demonstrate that it can sustain the performance of its businesses, which, in turn, will sustain the share-price trajectory.
Furthermore, investors will need to pay attention to the value Thai Beverage can extract from its latest acquisitions (such as Saigon Beer in Vietnam, KFC in Thailand, etc) as well as its 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.