Thai Beverage Public Company Limited (SGX: Y92), or ThaiBev, is a company operating in four different segments, namely, spirits, beer, food, and non-alcoholic beverages. Year-to-date, ThaiBev’s stock price is up by a whopping 42%. In this article, I’ll try to understand why its share price has shot up so fast.
Reasons for higher price
There are many reasons that can cause a stock price to move. Generally, stock price movement is driven either by business performance or investor sentiment. The former is related to how a business performs in a given period, looking at financial 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 pairing such as greed and fear, optimism and pessimism, bull and bear, etc.
In the case of ThaiBev, I believe both factors contributed towards the recent improvement in its share price, especially its recent improvement in net profit. Let’s look at the table below.
Source: Thai Beverage results presentation
The above is a slide from Thai Beverage’s 2019 first-half (for the financial year ending 30 September 2019) results presentation.
What we can see from the above is that all metrics came in stronger as compared to the previous year. The above is a turnaround from 2018 performance when ThaiBev reported a 46.3% decline in earnings per share (EPS). All segments reported year-on-year improvement in revenue. This was offset by lower net profit in its beer and food segments. It also maintained its interim dividend per share of THB 0.15.
All in all, it was a positive performance in the first half of 2019 for the company, which benefitted its share price. Moreover, the stronger financial performance might have partially alleviated investors’ concerns around the company’s weakening performance in 2018. The change in investor sentiment might have also contributed towards the recent improvement in its share price.
Going forward, ThaiBev needs to demonstrate that its recent performance turnaround is sustainable. Furthermore, investors will also need to pay attention to the value that ThaiBev 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.
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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.