Trillion-dollar fluctuations, how is the golden egg-laying goose Sabeco in the hands of the Thai billionaire?

With its market capitalization plummeting by billions of dollars and market volatility, Sabeco faces many challenges after the State divested and was acquired by ThaiBev. However, the number one enterprise in the Vietnamese beer industry is still the "goose that lays the golden eggs" for the Thai billionaire.

At the end of 2017, the Vietnamese mergers and acquisitions (M&A) market recorded an unprecedentedly large deal. Thai Beverage of Thai billionaire Charoen Sirivadhanabhakdi spent about VND110,000 billion (equivalent to about USD4.8 billion at the USD/VND exchange rate at that time) to own 53.6% of shares of Saigon Beer - Alcohol - Beverage Corporation - Sabeco (SAB).

The State divestment deal at Sabeco is famous because this is the number 1 enterprise in the Vietnamese beer industry, a "precious gem" that brings a lot of dividends to the State. At the end of 2017, Sabeco shares had a very high price, at one point reaching 320,000 VND/share, equivalent to an adjusted price of about 150,000 VND, much higher than the price of 60,600 VND/share as of June 25. With the current price, Sabeco has a capitalization of more than 77,700 billion VND (about 3.05 billion USD). The remaining shares of the Thai billionaire's enterprise are about 1.63 billion USD, much lower than the initial investment of more than 4.8 billion USD. To finance this huge deal, ThaiBev and its wholly owned subsidiary BeerCo Limited took out six different loans, totaling $5 billion. Specifically, ThaiBev borrowed 100 billion baht, or about $3.05 billion, from Thai banks; BeerCo borrowed $1.95 billion through two lead banks, Mizuho Bank Singapore branch and Standard Chartered Singapore branch. The loans were for two years. To date, it is unclear whether the Thai billionaire's businesses have fully paid off their debts. What have the Thais earned after six and a half years? Although Sabeco's capitalization has fallen sharply since the end of 2017, Sabeco is still one of the businesses that pay dividends regularly at a high rate, with a very good financial situation and cash flow compared to other businesses on the Vietnamese stock exchange. Since acquiring Sabeco, the Thais have earned more than VND10,600 billion in dividends. The most recent was a 20% dividend (equivalent to VND2,000/share), expected to be paid to shareholders on July 31. This is part of the dividend for 2023. Sabeco has approved a plan to pay a total 2023 dividend of 35% in cash (VND3,500/share), equivalent to a total dividend payment of VND4,489 billion.

The prospect of the beer industry in Vietnam is no longer as super profitable as before. Photo: TTT

Thus, after nearly 7 years, the enterprise in the ecosystem of billionaire Charoen Sirivadhanabhakdi has earned dividends equivalent to about 10% of the capital spent to buy 53.6% of the shares of this Vietnamese beer enterprise, equivalent to about 1.5%/year. This number is very large in absolute value, but in terms of ratio, it is quite modest. Moreover, if it had to borrow from a bank, this would be an unimpressive investment deal for the Thai billionaire. This ratio is modest in the context of very high interest rates in the world market. The US base interest rate is at 5.5%/year and the commercial interest rate is about 6-7%/year. Meanwhile, interest rates in Asia are about 8-10%/year. Less bright prospects Although still paying dividends regularly, Sabeco's profits have recently declined and the business outlook is not as bright as before. In the first quarter of 2024, Sabeco recorded an increase in revenue and profit compared to the same period. Revenue increased by about 15% to VND 7,200 billion, and after-tax profit increased by 1.8% to VND 1,024 billion. However, these figures are still far behind the revenue of VND 9,000-10,000 billion and profit of VND 1,400-1,800 billion in many previous quarters. Strict implementation of alcohol concentration testing has a positive impact on the traffic situation, but also makes the revenue of beer companies no longer as fertile as before. Vietnam is the largest beer consumer in Southeast Asia and top 10 in the world, but this market shows clear signs of decline. Revenue of most businesses in the industry decreased by 10-20%, while raw material prices increased sharply following world developments. Not only that, beer production businesses are also affected by declining demand. Vietnam's economy is still facing many difficulties, consumers are still tightening their belts. In 2024, the enforcement of alcohol concentration testing regulations will continue to be strict. Consumer habits have also changed, not to mention low demand. This is a challenge for beer and alcohol businesses, including Sabeco. Also in the industry, Heineken has just sent a document to Quang Nam province regarding the temporary suspension of the Heineken Quang Nam Brewery. A few years ago, the estimated after-tax profit of the Heineken Vietnam system was around VND10,000-12,000 billion/year. In 2023, this figure will only be VND6,000-7,000 billion.

Sabeco's profit drops to record low Despite difficulties, Sabeco still actively spends on advertising and promotions with more than 1,560 billion VND, up 34% over the same period. Source: https://vietnamnet.vn/bien-dong-nghin-ty-ga-de-trung-vang-sabeco-ra-sao-trong-tay-ty-phu-thai-2295155.html