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Chui Ong asked 4 years ago

Hi Everyone,
Anyone looking at Thai Beverage? The latest 1Q18 results show approximately 22% drop in net earnings (excluding F&N/FCL, Sabeco and other non-recurring expenses). Any thoughts if this drop is enduring in nature? I only found a brief mention of retails “de-stocking” their inventory. Not sure if this revenue drop will persist for the remaining quarters. 
Second, their debt has ballooned to $220,000 million Baht after the 4 acquisition (mostly for Sabeco), and approximately $168,000 million Baht are due for maturity in Dec 2019. While their 1Q18 cash flow from operations was only $5,800 million Baht. Does this look like they are pretty over leveraged? Any idea on what kind of valuation ratios/numbers that I should calculate/look at to figure out if the company is over-leveraged?
Also, would it be reasonable to value Thai Beverage at comparable PE to companies like Breadtalk (high cashflow from operations) and value it at around 16-20x PE? Otherwise, what valuation metric would you recommend?

1 Answers
Victor Chng answered 4 years ago

Hi Chui Ong,
For leverage ratio, you may want to use debt to equity ratio and Debt to cash flow ratio to determine their leverage level.
As for valuation, you can use PE and Price to Cash Flow (PCFO) to value them. You just have to find out their average trading range for PE and PCFO.