SHARES of mainboard-listed Thai Beverage (ThaiBev) : Y92 0%hit a 2.5-month high on Wednesday (Jan 3) morning amid heavy trading, extending gains from the previous day.

 

This came as Thailand&rsquo s Cabinet approved a tax cut on alcoholic beverages and entertainment venues in a bid to support tourism.

 

ThaiBev&rsquo s counter rose as much as 1.9 per cent or S$0.01 to S$0.55 right when the market opened on Wednesday. The last time the counter closed near this level was on Oct 16, 2023.

 

The beverage manufacturer, which owns Chang Beer, was the second most traded by volume on the Singapore bourse as at 10.25 am on Wednesday, with 55.7 million shares changing hands. Its shares were up 0.9 per cent or S$0.005 to S$0.545 then.

 

On Tuesday, a Thailand government spokesperson said taxes on wine will fall to 5 per cent from 10 per cent, while taxes on spirits will drop from 10 per cent to zero. The tax measures will expire at the end of 2024.

 

DBS Group Research believes the new development will be positive for alcohol consumption and provide a share price catalyst for ThaiBev.

 

&ldquo This cut in alcohol taxes could also douse market concerns of an increase in excise taxes on alcohol to fund the government&rsquo s recently announced fiscal measures,&rdquo DBS said in a research note on Wednesday.

 

The research team has retained its &ldquo buy&rdquo call on the counter and target price of S$0.72, implying a potential upside of 32.1 per cent. It said the counter is trading at 12 times earnings, which is around 1.5 standard deviations below ThaiBev&rsquo s 15-year historical price-to-earnings ratio.

< News update clarification> : Thai alcohol tax cut pertains to &ldquo home-based&rdquo fermented alcoholic beverages rather than all &ldquo spirits&rdquo

What&rsquo s new

Referencing to our earlier comments on 2 Jan 2024, the Thailand tax cut on alcoholic beverages announced on 2 Jan was carried in various media and referred to as &ldquo spirits&rdquo . 

Upon further clarification, this pertains to a narrower category and the tax cut for alcoholic beverages pertains to &ldquo home-based&rdquo fermented alcoholic beverages with not more than 7% alcohol by volume. As such, the announced alcoholic beverages tax cuts should not have material effects on ThaiBev&rsquo s products portfolio.

Nonetheless, the alcoholic tax cut news as well as measures to promote tourism has created positive buzz in promoting tourism and consumption, which could signal the Thai government&rsquo s stance to stimulate the economy. For ThaiBev, we believe the counter is trading at attractive valuations at ~12x FY24F PE, which is at -1.5 standard deviation from 15-year historical average.