TRIS Rating affirms the company rating of Thai Beverage PLC (ThaiBev) at “AA”. At the same time, TRIS Rating assigns the rating of “AA” to ThaiBev’s proposed issue of up to Bt50,000 million in senior unsecured debentures. The proceeds from the new debentures will be used to repay outstanding debts and reserve for working capital.
The ratings reflect ThaiBev’s robust competitive position in the domestic beverage market, extensive distribution network, stable operating cash flow, and ongoing efforts to diversify its sources of income. These strengths are partially constrained by intense competition, as well as strict regulations and frequent hikes of excise taxes in the alcoholic beverages industry.
In fiscal year (FY) 2017, total revenue was Bt190 billion, slightly declined by 0.02% from the previous year. The operating profit margin improved to 16.8% in FY2017, compared with 16.3% in FY2016. The rise came because of the company's ongoing cost control efforts plus the improvement of its operating efficiency.
ThaiBev’s financial leverage has risen significantly as a result of a number of strategic acquisitions late last year. The ratio of total debt to earnings before interest, tax, depreciation, and amortization (EBITDA) is expected to increase to 4.5 times in FY2018, from 1.1 times in FY2017. ThaiBev aims to use its operating cash flow to gradually reduce the level of leverage over the next few years. TRIS Rating forecasts the total debt to EBITDA ratio will decline to around 3 times by FY2020. The forecast is built on the strengths of ThaiBev’s business and the management team’s commitment to deleverage.
RATING OUTLOOK
The “stable” outlook reflects TRIS Rating's expectation that ThaiBev will maintain its dominant position in the Thai alcoholic beverages market and continue to deliver strong cash generation, which will be used to reduce financial leverage over the next few years.
RATING SENSITIVITIES
ThaiBev's ratings and/or outlook could be revised upward, should the total debt to EBITDA ratio fall below 2.5 times on a sustained basis. To the contrary, the ratings and/or outlook could be revised downward if ThaiBev's financial profile weakens further, caused by either a significant deterioration in profitability or a significant further rise in financial leverage.
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