Is Thai Beverage expensive?

Thai Beverage is currently trading 4 times its book value. For $0.40 per share, investors are owning $0.10 worth of their assets.

However, with the recent acquisition of F&N, Thai Beverage will be able to expand its distribution network in SEA.

Some institutions claimed that its valuations are still cheap.
Source: http://www.remisiers.org/cms_images/research/Dec10-Dec14_2012/Thai_Beverage_AmFraser_121211.pdf

I still think the valuations now are expensive but i've decided to spend a quarter of my reserves to buy Thai Beverage.

The amount of cash on hand now is crucial as the STI had hit a 1 year high. Whether it will drop or not within the next few months in 2013, it is always better to keep some spare cash in case good stocks become cheap.

This is the lesson i learned in 2011 when stock prices took a dive and i was desperate for cash as OCBC and Keppel dropped to ~$6. I did not manage to ride the wave as i was cashless at that point of time.

GLP positioned for growth

Global Logistic Properties ("GLP") is one of the world's largest providers of modern logistics facilities, with a market-leading presence in China and Japan. It owns, manages and leases out 446 completed properties in 187 logistics parks spread across 36 major cities in China and Japan, forming an efficient logistics network with properties strategically located in key logistics hubs, industrial zones and urban distribution centres. By providing flexible solutions of Multi-tenant, Build-to-Suit and Sale and Leaseback, GLP is dedicated to improving supply chain efficiency to meet strategic expansion goals of the most dynamic manufacturers, retailers and 3rd party logistics companies in the world.

Source: http://www.glprop.com/businessModel.php


GLP had announced plans to invest US$334M to acquire assets in Brazil. Its CEO Ming Z Mei said: "We remain mindful of the global economic conditions, but are confident that our unrivalled market presence in China, Japan and now Brazil positions us well for future growth." 

Source: http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1237208/1/.html

Brazil is an emerging economy which of 2011 ranks 6th of the world's largest economies. Its economy is reliant to the export of commodities which includes, coffee, iron ore, oranges, sugar etc. Its major export partners includes US, China and Argentina. 

Source: http://www.bbc.co.uk/news/business-16332115

Currency rate for Brazil remained weak as Brazil’s central bank has sold reverse currency swaps to keep the real weaker than 2 per dollar to support exporters. It sold $1.4 billion of contracts Oct. 25, $1.6 billion Oct. 23, $1.3 billion Oct. 5, $5.7 billion Sept. 12 through Sept. 17 and $350 million Aug. 21. The August reverse swaps were the first since March.

Source: http://www.bloomberg.com/news/2012-11-16/brazilian-currency-extends-its-biggest-weekly-decline-since-june.html

Brazil is an emerging economy with its still weak currency which makes it an attractive place to be invested in. The acquisition from GLP could reflect gains if the Brazilian currency strengthens. 

GLP with its NAV of ~$2.2 last closed at $2.74 at SGX. This stock has positioned itself for future growth and is worth a good look at.

Know what you are buying

Rowsley, a company controlled by businessman Peter Lim announced plans for a S$581 million deal that will transform Rowsley into a major real estate player.

Source: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_93D67C6962F8B30548257ADB001CF5C4/$file/RowsleyLtd.MediaRelease_21.12.2012.pdf?openelement

Based on the 2012-2013 half year results, Rowsley write off a net loss of about $26M and had a NAV (net asset value) of $0.0427.

It's closing price today is still at $0.295. The price to NAV ratio is about 7:1. For every $700 you invest in this stock, you are only buying $100 of its assets.

People playing contra on the stock market are heavily buying up this stock. But if you are playing it, don't expect it to maintain its upward trend since numbers have shown that it is expensive and overvalued.

Bangkok trip to study Thai Beverage

It was a very fruitful trip to bangkok as along the way, i did some market research on Thai Beverage.

The Chang brand in Thailand symbolizes their local brand just like Tiger Beer which signifies Tiger Beer in Singapore.

Apart from operating their beer business, they also own 89.259% of Oishi Group.

Oishi group operates a wide variety of beverages from green tea, black tea and coffee.

Source: http://www.oishigroup.com/en_brand_beverage.php

Its beverage business resembles Pokka.

Oishi group operates about 6 types of different Japanese restaurants in Thailand.

Source: http://www.oishigroup.com/en_brand_restaurant.php

Oishi group distributes food to convenience stalls in Thailand

Source: http://www.oishigroup.com/en_brand_food.php

Oishi group also operates catering and food delivery services in Thailand.

Source: http://www.oishigroup.com/brand_delivery.php

Thai Beverage owns 64.66% of Serm Suk Public Company which manufactures and distributes beverages throughout Thailand.

"Our strong point is our distribution system," said Parinya Permpanich, marketing/sales operation director, adding that Serm Suk has five bottling plants and 48 branch offices throughout the Kingdom. The company has 1,200 sales trucks, 150,000 coolers and more than 200,000 retail outlets and eateries that are ready to support the est product line, Parinya said.

Source: http://www.nationmultimedia.com/business/Serm-Suk-seeks-No-1-spot-for-est-cola-in-3-years-30193574.html

Thai Beverage is able to utilise the wide distribution capabilities of SermSuk. Oishi Group on the other hand is able to enjoy cost efficiency by carrying Chang, est Cola beverages in its restaurants, and also widening Thai Beverage distribution network.

Thai people will continue to consume products by these companies. Thai Beverage is trying to maintain the monopoly and, recently it purchased F&N stakes in an attempt to expand the Chang beer business within Singapore and other parts of Asia.

The upward growth potential of the company is limitless. However, the current debt to equity ratio may be a worry after the acquisition of 29% F&N.

The combination of Thaibeverage, Oishi Group and Serm Suk is perfect. This is the perfect stock to invest in.

But it is not a good time to go in now because they recently took a loan from a Singapore bank.

My lesson on Bukit Sembawang

I bought this stock last year at $4.5 and it dropped to $3.80 subsequently. I didn't know what was going on initially and thought that this stock did not perform well. After which in August this year, I decided to sell the stock because I thought it had gone back to its high of $4.77.

However, this stock did not drop further when i sold it, instead it shoot all the way up to $6.80 on last Friday 14 Dec 12's closing on SGX.

After this incident, i realised that i don't actually know what i was buying at that point of time. This 2Q2013, its Net Asset Value (NAV) went up from $3.08 last year 2Q2012 to $4.29. Its balance sheet reflected little low debts and almost 88% of its assets were made up of its share capital and reserves.

Shareholders were owning more of its assets than their company debts and thus, it reflected more value in the company followed by the rise of share price value.

Prices in private home in Singapore are not likely to go down. It is because more wealthy people from all over the world are coming here to settle down due to a number of factors like low crime, stable government, clean environment and good infrastructure transport network. (International Living 2010) "The wealthy are attracted to Singapore for its location, low taxes, clean environment and low crime; that’s why there are so many rich Chinese and Indians living there. Singapore also attracts the global wealthy, such as hedge fund managers who need a base in Asia."

My lesson on this is that as property prices go up, earnings of property holding companies are likely to go up as well.

The principal activity of the Bukit Sembawang Estates is an investment holding company whilst the principal activities of the subsidiaries are those of property development, property mortgage financing and the holding of properties and investments. The Group mostly developes landed properties around the Seletar and Sembawang areas.

Reference List
International Living. 2010. Singapore: Where Wealthy People Are Putting Their Money. [ONLINE] Available at:http://internationalliving.com/2010/08/singapore-where-wealthy-people-are-putting-their-money/. [Accessed 15 December 12].

Market Updates

SGX

1Q2013 NAV =$6.5. Revenue reduced 4-5%. Now might not be a good time to buy in.

Wait till March-May period for a buy in $6.5 or below

SMRT

Extremely high borrowing costs, accompanied by strong operations/maintance costs puts SMRT in a bad shape.

Thai Beverage

Watch out for their next results. Cash flow generated from operations have to increase significantly in order to fund high borrowings from the acquisition of ~30% in F&N.

Silverlake Axis

High cash generated from operations, together with less investing and financing costs puts this company in a very strong financial position. Bought in at $0.465.

The Hour Glass

Cash flow indicates a higher borrowing cost to fund its overseas expansion. If net cash generated from operations are able to cover financing and investing cost, then it may be an indicator to start buying.

Starhill Global REIT

Cash flow indicates more debt than earnings due to the revamp of Wisma Atria. May need to wait a while for this counter to rebound as it need more time to repay borrowings.