Brokers' Call: Thai Beverage

The investment thesis of ThaiBev is centred on its Chang beer making further, while maintaining its dominant foothold in the spirits business.
The investment thesis of ThaiBev is centred on its Chang beer making further, while maintaining its dominant foothold in the spirits business.PHOTO: BLOOMBERG

THAI BEVERAGE

Broker: CIMB

Call: Buy

Target Price: $1.07

The investment thesis of ThaiBev is centred on its Chang beer making further market-share gains, while maintaining its dominant foothold in the spirits business. Its target of 45 per cent market share by 2020 is achievable.

Key competitor Boon Rawd had launched a new brand called Leo in the fourth quarter of last year, but to little effect. It may also have a new product in the pipeline. But the threat to Chang may be minimal .

Chang will at least be able to maintain its beer market share in financial year 2017.

The recent pullback in consumption during Thailand's mourning period is temporary. There is positive sentiment towards the group's long-term merits and Chang is on track to becoming the market leader. Key risks include prolonged weakness in consumption or loss in beer market share.


COMFORTDELGRO

Broker: OCBC Investment Research

Call: Buy

Target Price: $2.49

ComfortDelGro (CDG) recently announced the acquisition of the remaining 49 per cent stake in ComfortDelGro Cabcharge (CDC), a private bus operator in Australia, for a cash consideration of A$186 million (S$196 million), and it is expected to be completed by the first quarter of this year.

The acquisition is positive on long-term growth potential as the government progressively privatises more bus routes.

Separately, even though TransCab recently cut its taxi rental rates by up to 35 per cent, it is not a reason to panic as CDG has not been sitting still in the face of pressures from Uber and Grab.

CDG, since two months ago, has been rolling out a revenue-sharing scheme to its taxi hirers, as part of its efforts to maintain its high hired-out rate, which we believe will help mitigate taxi revenue declines.


ASCENDAS REIT

Broker: OCBC Investment Research

Call: Buy

Target Price: $2.72

Ascendas Reit's (A-Reit's) move to grow its science parks exposure is a positive move as demand and supply dynamics for this segment are relatively more positive within the industrial sector.

A-Reit recently proposed to acquire the leasehold interest in the property located at 12, 14 and 16 Science Park Drive from its sponsor for a purchase consideration of $420 million (estimated total costs of $437.5 million).

The property is expected to generate a net property-income yield of approximately 6.3 per cent before acquisition costs and 6 per cent post-acquisition costs in the first year of ownership.

It would boost A-Reit's portfolio weighted-average lease expiry to 4.4 years from 3.7 years. The triple-net leases also have weighted built-in rental escalations of 2.2 per cent to 2.5 per cent per annum.

A version of this article appeared in the print edition of The Straits Times on January 09, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe