Beverage counters brewing strong

PHOTO: Beverage counters brewing strong

SINGAPORE - Investors of Thai Beverage (ThaiBev) have had reasons to toast the brewing firm's stock price performance so far this year.

The counter has charged up more than 50 per cent this year, far outpacing the Straits Times Index's (STI) 4 per cent gain in the same period.

Beverage counters have made market headlines of late, with ThaiBev replacing IHH Healthcare as one of the 30 STI component stocks last month.

Then last week, the venerable Fraser and Neave (F&N) conglomerate made way for Hutchison Port Holdings Trust in the STI.

Investor sentiment has been boosted by the feel-good factor after ThaiBev main shareholder Charoen Sirivadhanabhakdi's audacious takeover bid for F&N unveiled late last year.

The Thai tycoon eventually succeeded in securing his prize earlier this year, which put ThaiBev on the radar of traders and the regional media alike.

All of this merger and acquisition (M&A) activity plus anticipated revenue growth in overseas markets have been adding to the fizz for such counters, and sweetening investor sentiment in the process.

Here, none is bigger than ThaiBev, which now has a market value of more than $15 billion.

ThaiBev's share price has been one of the main beneficiaries of the F&N saga. It has more than doubled in the last 12 months.

On Tuesday last week, the counter hit its all-time high of 65 cents amid high volumes, with large trade sizes suggesting institutional interest.

CIMB, which raised its target price from 74 cents to 77 cents last month while keeping an "outperform" call, noted that catalysts are likely to come from earnings delivery by the non-alcoholic beverage business.

CIMB analyst Kenneth Ng noted after a company visit: "Post-visit, we are more excited about ThaiBev's non-alcoholic beverage business... this still understates the value of its business given the strong barriers to entry from ThaiBev's control of Oishi, Serm Suk and F&N."

Closer to home, Super Group's share price charge has also provided its investors with plenty of cheer.

The home-grown instant coffee and cereal maker has seen its share price soar nearly 20 per cent this year, and is currently trading at around $3.85. Super has a market value of just over $2 billion.

Like ThaiBev, the counter has also more than doubled in the last 12 months.

That's a sharp swing in fortunes from early 2009, when Super languished at a lowly 32 cents.

Six of the 10 analysts who cover the stock have a "buy" rating, with the other four advocating a "hold", according to Bloomberg data.

Among them is Maybank Kim Eng's Mr James Koh, who has a $4.80 target price and tips more scope for gains for the "super- sized target for F&B giants".

He said Super's market share and distribution reach makes it an M&A target, adding: "Interested parties could be F&B companies in other countries looking to enter ASEAN, in which case Super would be an immediate foothold."

Mr Koh estimates that Kirin's recent $2.7 billion offer for the food unit of a major listed conglomerate would imply an offer of $6.40 for Super if a buy-out occurs.

Another beverage play which has been sizzling is Food Empire, a leading instant coffee player in Russia and Eastern Europe with a market value of around $370 million.

The counter is up more than 20 per cent this year, having surged some 80 per cent in 2012.

DMG analyst Melissa Yeap, who has a "buy" call with a price forecast of 84 cents, said: "We continue to like the firm for its dominant position in Russia and Eastern Europe."

The broker recently hosted Food Empire for a roadshow here.

DMG raised its revenue growth projections, taking into account higher sales from new product launches and external sales from its non-dairy creamer plant.

But its earnings forecast remains largely unchanged after accounting for higher depreciation and start-up costs.

DMG noted that Food Empire's management has turned more bullish in terms of topline growth.

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