First Read: Vietnam Beer Sector

Research evidence excerpt

First Read: Vietnam Beer Sector

arent company, TCC Holding); 5)

overpaying for an acquisition that may not be accretive over the long term; 6) failed efforts to

expand overseas, leaving Thai Beverage with only a mature domestic market; 7) inability to

service its elevated debt levels leading to possible equity issuance which would be dilutive to

shareholders; 8) lack of synergy with Sabeco or acquisition creates problems which depress

Thai Bev's earnings; and 9) worse than expected collapse in demand due to a resurgence of

COVID-19. Upside risk for the company include: better-than-expected beer consumption

growth and market share gain.

Our price target for Heineken is based on 17x EV/NOPAT multiple on our 2027 forecasts.

Risks: (1) consumer expenditure levels and the economic and political stability in the countries

of operation; (2) governmental and regulatory risk of excise duty increases, or restrictions

such as advertising or deposit laws over which the industry can exercise limited influence; (3)

weather in any given year due to the seasonality of consumption above all for beer and soft

drinks; (4) shifts in consumer trends between categories and substitution risk from other

competing products, namely wine and spirits; (5) competition and the impact on returns from

increased A&P and capital investment; (6) variability of input costs such as raw materials (e.g.

barley, malt, sugar and agave) and packaging materials (e.g. glass, aluminium, and PET) as

well as fuel costs on distribution; and (7) increasing cost of consolidation as asset values

continue to increase, thereby adversely affecting the level of industry returns.

For Carlsberg, our valuation is using a multiples based framework, via a 19x EV/ NOPAT

multiple, in line with European Staples.