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Thai Beverage Public Company Limited Has an Excellent Business Segment That Will Make Investors High

Thai Beverage Public Company Limited (SGX: Y92) is a large liquor and beverages conglomerate with four distinct divisions: spirits, beer, non-alcoholic beverages (NAB), and food. The group has, as of 30 September 2018, 173 subsidiaries, including 18 distilleries, three breweries, and 11 non-alcoholic beverage production facilities in Thailand. The group has a presence in over 90 countries.

As the group is a gigantic corporation with a market capitalisation of around S$20.6 billion, it’s easy to get lost when analysing the company. An easy approach I adopted is to look at the company’s various business divisions and tease out their contributions to the group’s overall revenue and profitability. In the process, I discovered an excellent business segment of Thai Beverage that should power the group’s business to new heights.

Revenue mix


Source: Thai Beverage H1 2019 Presentation Slides

First, let’s look at the revenue mix for Thai Beverage by division. From the chart above, it’s clear that spirits and beer are the two largest divisions for the group and contribute roughly the same proportion (44%) of revenue. The other two divisions (NAB and food) are more like support divisions that enable the group to provide a wide range of beverages but that do not contribute much to the top line.

Profit mix


Source: Thai Beverage H1 2019 Presentation Slides

The net profit breakdown is more interesting, in my opinion. Here, we can see that the spirits division makes up the bulk of net profit at 88.3% of the total, while beer makes up merely 12.2% of total group net profit (note that the two numbers add up to more than 100% as the NAB division is loss-making).

This made me think a little deeper: How could a division that contributes 44% to revenue end up contributing 88% to net profit? The profit contribution from the spirits division was actually double that of its revenue contribution!

A powerful business division

By digging even deeper into the net profit margins of each division, as shown in the table above, I managed to uncover why this was so. Spirits turned out to be an extremely impressive division, sporting net profit margins of 16%, while beer’s net margins were lacklustre at just 1% to 3%. This explains why spirits ended up contributing to the bulk of net profit even though both the spirits and beer divisions had the same revenue contributions.

The evidence shows that the spirits division is actually Thai Beverage’s strongest division and will power the growth of the group moving forward. Note that on a year-on-year basis, the revenue for the spirits division has also increased by 8.9%, while net profit margin improved slightly from 16.5% to 16.8%. All of these signs bode well for the group, and investors can be optimistic about the group’s future growth prospects.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.