$1.17 billion of Sabeco capitalisation evaporates

Sabeco is at its lowest since being acquired by ThaiBev

Ending the trading session on February 17, the stock of Saigon Beer, Alcohol and Beverage (Sabeco), was VND186,000 ($8.1), down 2 per cent compared to the end of the previous week. This is the lowest the ticker has been since July 2017.

Since the stock exchange reopened after the Lunar New Year holiday, Sabeco's shares have been continuously declining. Compared to the price level before the holiday, Sabeco shares dropped 19 per cent of their value. The company's market capitalisation fell by more than VND27 trillion ($1.17 billion).

While Thai billionaire Charoen Cirivadhanabhakdi bought Sabeco at a VND320,000 ($13.9) share price in December 2017, the ticker now stands 42 per centlower.

Currently, 53.6 per cent of Sabeco shares are in ThaiBev hands, worth nearly VND64 trillion ($2.78 billion), only 55 per centof the nearly $5 billion that ThaiBev spent on the acquisition.

Habeco, another giant in the beer industry, also witnessed many sessions of falling after the Lunar New Year. Habeco ended the trading session on February 17 at VND62,300 ($2.71), down 13 per cent compared to the last trading session before the holiday.

In a recent analysis, expert from SSI Securities Corporation forecast the beer industry to suffer from the effects of the COVID-19 epidemic in the short term and new, stricter penalties for drink drivers from Decree No.100/2019/ND-CP.

Since Decree 100 came into effect early this year, beer consumption has declined significantly compared to the same period last year. Before the Tet holiday, a peak period for beer and alcohol consumption every year, many supermarkets and grocery stores staged promotions to reduce inventories.

According to SSI's analysts, the much higher penalty in Decree 100 will alter consumer behaviour at least in the short term. This is reinforced by the COVID-19 as customers tend to go out less frequently with friends.

The SSI report stated that Sabeco's beer sales at Tier I distributors and agents in January were sluggish. Sabeco lowered the first-quarter sales targets of its breweries. Habeco also recorded a 30 per cent on-year drop in beer sales in January.

With the short-term impacts of Decree 100 and the epidemic outbreak, SSI believes that Sabeco will rely on a cost reduction strategy. According to the company management board, the price of malt and hops is expected to continue to decline this year, which in turn could potentially lead to a further reduction in raw material costs.

Sabeco has also recently developed its supply chain and management systems to increase efficiency and cut operating costs. This is reflected in its net profit margin improving over the past year.

SSI expert predicted that Sabeco's net revenue in 2020 could reach VND37.3 trillion ($1.6 billion), 2 per cent lower than in 2019. However, the analysts expect Sabeco's net profit to continue growing, reaching VND5.64 trillion ($245.22 million), 5.1 per cent higher than last year.