SINGAPORE: The crown of Thai Beverage Plc, brewer of Chang and Mekhong brands, as top performer in Singapore this year is under siege after rival Anheuser-Busch InBev NV shelved the initial public offering of its Asian unit to raise up to $9.8 billion.
That’s according to analysts at Tellimer Research and KGI Securities (Singapore) Pte, who said that the stock will take a hit on “sentiment” as Budweiser Brewing Company APAC Ltd’s IPO had been expected to boost the valuation of ThaiBev as bankers guided the former’s multiples at a premium to the Bangkok-based brewer. Shares of ThaiBev tanked as much as 4.1% on Monday.
Even with the slump, ThaiBev is still the top performer on Singapore’s benchmark Straits Times Index this year. The stock had gained 42% or $4.7 billion in market value as of Friday’s close. Of the 19 analysts tracking the stock as compiled by Bloomberg, none have a sell rating on the company.
ThaiBev shares dropped Monday because the expectation was that Budweiser APAC’s IPO would lift valuations for the company, Nirgunan Tiruchelvam, head of consumer equity at research firm Tellimer Research, said by phone from Dubai.
The scrapped IPO of Budweiser will dent sentiment, but ThaiBev’s focus on deleveraging and the improving business outlook in Vietnam will support the stock at lower levels, said Tiruchelvam, who has a buy rating and the highest price target on the stock at S$1.10.
The brewer controlled by billionaire Charoen Sirivadhanabhakdi earned the title of the world’s “cheapest alcohol name” at Goldman Sachs Group Inc in September last year after becoming the worst performer in its consumer stocks coverage.
The demise of AB InBev NV’s blockbuster initial public offering in Hong Kong left the world’s largest brewer in a bind.
After reversing course on Friday over plans to sell a stake in its Asian unit to raise as much as $9.8 billion, the Budweiser owner needs to find a new way to reduce its $100-billion debt pile and mollify shareholders, while reinvigorating a business that’s lost its fizz and keeping credit-rating agencies at bay. Standard & Poor’s has a negative outlook on AB InBev’s debt, which it ranks A-, the fourth lowest invetment grade.
“Any missteps in debt reduction due to reduced profitability could lead to further downgrades,” Bloomberg Intelligence analysts Hoai Ngo and Madeleine Hart wrote in a note.
Among the few options the company could pursue are cutting costs, revisiting an IPO, selling assets or cuting the dividend again.