• Series of corporate actions in F& B business could lead to potential IPO of &ldquo F& B Co&rdquo to (i) unlock value, (ii) deleverage at parent company level, and (iii) improve strategic focus 
• F& B co could be worth > SGD3.4bn (> SGD0.15/share), above ThaiBev&rsquo s current EV/EBITDA and PE valuation, given (i) strong brands, (ii) access to sizable SEA markets, and (iii) high growth potential
• Revised FY25F earnings by +1% on inclusion of FNN as a subsidiary and exclusion of FPL post share swap
• Lift TP to  SGD0.77 as we peg our TP to 16x PE, -0.5SD of its 10-year average 

Something bigger brewing behind corporate actions 

How will Thai Beverage be reorganised?

Misunderstood as a largely spirits-only company.  We believe the market views Thai Beverage (ThaiBev) as largely a spirits  company given the segment&rsquo s significant sales and EBITDA contribution of average 45% and 62%, respectively, for the last 5 years. Given the muted growth profile of the spirits segment, the market accorded a low double-digit PE valuation to the entire company. 

Conglomerate with three major business units.  While its sizes pale in comparison to the spirits business, beer  and  F& B  (includes non-alcoholic beverages [NAB] and Food business) are underappreciated businesses within the company with potential for value-unlocking. Overall, we view the company as a conglomerate with three major business units: Spirits Co, Beer Co, and F& B Co (refer to Diagram 1 for more details on envisioned corporate structure).

Focus has been on Beer Co time to highlight F& B Co.  We explored the potential of its beer co in a prior report,  Who could tie the knot in the Golden Peninsula?, and are now exploring the potential of its F& B co, which we believe has remained under the radar. 

Why do we believe there&rsquo s more to F& B co than meets the eye?

Recent share swap likely part of a master plan to realise value of  NAB and food operations.  Over the last two years, Thai Beverage (THBEV) has conducted a series of corporate actions (detailed below) with regards to its  NAB and Food business, which we group under  F& B. We believe the recent share swap is just the beginning of this series of corporate actions. 

Thailand Tourism: Boosting local tourism

Thailand Tourism

Boosting local tourism

What&rsquo s new?: The government has opened the registration for Co-payment program for Northen Thailand Tourism, Aeo Nuea Khon La Khrueng, on the official website from 1 November 2024. Under this scheme, the government will subsidise half of spending on qualified accommodation, restaurants, and general shops in 17 provinces in Northen Thailand with a budget of Bt400 per person (total 10,000 persons) during 1 November 2024 to 31 December 2024. This project is likely to be a part of the tourism stimulus measures series launching next year to boost local tourism. The Northen tourism project has been prioritised to boost the local economy after the floods. 

Comment: Given the limited budget under Aeo Nuea Khon La Khrueng, we do not expect this program to encourage major spending, although this may benefit the mid to low income group. Thus, we believe this might still benefit the economy, as well as the budget hotel segment as the subsidy is a substantial discount to the room price. Among all listed names, the Erawan Group (ERW) has the biggest contribution from the budget hotel segment (Hop Inn) compared to other operators. However, according to the company&rsquo s data, Hop Inn in Northern accounted for 3% of its hotel revenue in 1H24. Thus, it may not be substantial at this point.

Nevertheless, we believe the upcoming series of tourism stimulus measures next year will be more effective to boost the local tourism in Thailand with higher subsidies. The key beneficiaries would be the operators with big contributions from local tourism, thus we expect ERW should stand a good chance to gain from this upcoming scheme. AOT should also benefit given its monopoly-liked characteristics of local air transportation in key airports in Thailand.