TEXT-S&P summary: Thai Beverage Public Co. Ltd.

(The following statement was released by the rating agency)

Oct 15 -

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Summary analysis -- Thai Beverage Public Co. Ltd. ----------------- 15-Oct-2012

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CREDIT RATING: BBB/Watch Neg/-- Country: Thailand

Primary SIC: Malt beverages

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Credit Rating History:

Local currency Foreign currency

15-Jan-2007 BBB/-- BBB/--

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Rationale

The rating on Thai Beverage Public Co. Ltd. (Thai Bev) reflects the company's

dominant domestic market position in spirits, and high and stable cash flows.

Thai Bev's geographic concentration in Thailand, the company's still weak

performance in its beer division, and a growth strategy that may translate

into more aggressive financial policies partly offset these strengths.

Thai Bev's debt-funded acquisition of a 29% stake in Singapore-based

conglomerate Fraser & Neave Ltd. (F&N: not rated) for approximately Singapore

dollar 3.6 billion could adversely affect the company's credit profile, in our

opinion. We are still seeking more clarity about the company's plan to reduce

its debt over the next 24 months, its dividend policy, and the likelihood of

further debt-funded acquisitions. We will also assess the credit implications

for Thai Bev of any future related-party transactions between the company and

related party TCC Group (TCC: not rated). TCC offered to purchase the 69.5% it

does not own in F&N in September 2012.

Thai Bev's EBITDA of Thai Baht (THB) 14.6 billion for the six months ended

June 30, 2012, was about 60% of our full-year expectation. The company's

performance in spirits was stronger than we anticipated, with EBITDA margin of

about 27%, compared with our full-year expectation of 24%-25%. The

contribution of newly-acquired Serm Suk's operations also supported Thai Bev's

performance because of stronger-than-anticipated margin. Higher sales volumes

triggered a 22% increase in EBITDA for Thai Bev's beer division, although

higher marketing expenses weighed on the second-quarter performance. We still

expect the beer division to break-even in 2012.

Liquidity

Thai Bev has "adequate" liquidity, as defined by our criteria. We expect the

company's liquidity sources to cover its liquidity needs by about 1.2x over

the next 12 months. Our liquidity assessment incorporates the following

factors and assumptions:

-- Liquidity sources include our expectation of funds from operations of

THB18 billion-THB20 billion and a cash balance of about THB3.9 billion as of

June 30, 2012.

-- Liquidity sources also include about THB4.5 billion in committed

credit lines from domestic financial institutions. Thai Bev also has access to

more than THB35 billion in uncommitted credit lines, but we do not capture

those in our liquidity calculation given their uncommitted nature.

-- Over the next 12 months, liquidity needs include THB6.5 billion of

debt due and our estimate of working capital requirements of THB2 billion-THB3

billion.

-- Liquidity needs also include maintenance capital expenditure of THB4

billion and our expectations of dividend payments of about THB10 billion.

-- We expect liquidity sources to remain positive even if EBITDA declines

by 15%.

We assess Thai Bev's access to the Thai capital markets as strong, given its

long-standing banking relationships and strong domestic credit standing.

We do not include the cost of Thai Bev's F&N acquisition in our liquidity

needs. The company expects to finance this acquisition using bridge financing

from a number of financial institutions.

CreditWatch

We expect to resolve our CreditWatch placement with negative implications

within the next month. This will be after we have a better understanding of

Thai Bev's financial policy, particularly its dividend payout; more clarity

about the strategic intent of the acquisition, including potential synergies;

and the credit implications of any potential related party transactions

between Thai Bev and TCC.

We may lower the rating on Thai Bev if the company's deleveraging potential

reduces, such that we expect its debt-to-EBITDA ratio to remain above 3x over

the next 24 months.

We may affirm the rating if we expect Thai Bev's financial risk profile to

improve in the next 24 months. The ratio of debt to EBITDA at less than 2.5x

and the ratio of debt to debt plus equity lower than 40% by the end of 2014

could indicate such improvement.

Source: http://news.yahoo.com/text-p-summary-thai-beverage-public-co-ltd-105519906--sector.html

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