Hey Michael, just recently subscribed to you page! Thanks for the great write-up and deep-dive into Thaibev. It's a company I've been tracking for the last few years. It does seem significantly undervalued and they probably have a great runway ahead. The two things that have prevented me from investing is the political risk out of Thailand and the history of poor acquisitions. Are these the two fears justified in your view, especially now that the gap to fair value is even bigger than a year ago?
Thanks for the detailed presentation Michael. Since beer prices are already relatively high, do you think they'll have trouble passing through high raw material prices (especially wheat) in the coming quarters? Given the market is pretty mature yet margins are low despite a duopoly, what would you need to see changing for margins to rise?
Hi Nat! I actually a significant amount of time trying to understand how fast Uni-President China will raise its beverage prices. For UPC, I'm certain that it will happen, but with a lag. And that lag will probably lead to short-term gross margin pressure, until ex-factory prices are fully adjusted for higher input prices.
In ThaiBev's case, I'm even more convinced that they have pricing power, because alcohol is addictive. What's the alternative, other than perhaps a Thai version of moonshine? I also think that many of ThaiBev's customers are farmers who are actually enjoying windfall profits from higher commodity prices. In terms of the gross margin pressure for ThaiBev, I'd imagine that their gross profit margins are most impacted by sugar prices, which have held steady. Also look at ThaiBev's historical gross profit margin - it's been quite steady throughout its history.
So higher wheat and sugar prices is somewhat of a question mark for ThaiBev but not something I'd personally be all that worried about, at least longer-term.
Hey Michael, just recently subscribed to you page! Thanks for the great write-up and deep-dive into Thaibev. It's a company I've been tracking for the last few years. It does seem significantly undervalued and they probably have a great runway ahead. The two things that have prevented me from investing is the political risk out of Thailand and the history of poor acquisitions. Are these the two fears justified in your view, especially now that the gap to fair value is even bigger than a year ago?
Thanks for the detailed presentation Michael. Since beer prices are already relatively high, do you think they'll have trouble passing through high raw material prices (especially wheat) in the coming quarters? Given the market is pretty mature yet margins are low despite a duopoly, what would you need to see changing for margins to rise?
Hi Nat! I actually a significant amount of time trying to understand how fast Uni-President China will raise its beverage prices. For UPC, I'm certain that it will happen, but with a lag. And that lag will probably lead to short-term gross margin pressure, until ex-factory prices are fully adjusted for higher input prices.
In ThaiBev's case, I'm even more convinced that they have pricing power, because alcohol is addictive. What's the alternative, other than perhaps a Thai version of moonshine? I also think that many of ThaiBev's customers are farmers who are actually enjoying windfall profits from higher commodity prices. In terms of the gross margin pressure for ThaiBev, I'd imagine that their gross profit margins are most impacted by sugar prices, which have held steady. Also look at ThaiBev's historical gross profit margin - it's been quite steady throughout its history.
So higher wheat and sugar prices is somewhat of a question mark for ThaiBev but not something I'd personally be all that worried about, at least longer-term.
Very helpful, thanks Michael!