Brokers' take

Compiled by Lynette Khoo

THAI BEVERAGE | BUY

TARGET PRICE: $1.07

SEPT 19 CLOSE: $0.91

DBS Group Research, Sept 19

Thailand announced new excise taxes, which roughly translate to 1 per cent to 5 per cent of average selling price, effective last Saturday. As widely anticipated, the authorities also announced changes in excise taxes for alcohol among others, effective from the same date.

Based on our understanding, we estimate that the increase in excise taxes for spirits and beer ranges from 1 per cent to under 5 per cent.

Along with the authorities' earlier rhetoric, the latest change sees the tax rate referencing retail prices, from net wholesale.

Overall, the increase in excise taxes is well within our estimate and the effects should not have a large dampener on overall consumption.

In fact, this resultant excise increase is relatively muted compared with increases back in 2012 and 2013, where the excise change involved an increase of 5 per cent to 28 per cent.

We are retaining our forecasts and believe that ThaiBev should be able to pass on the increase to consumers without seeing significant impact on consumption volumes.

We maintain our "buy" recommendation on ThaiBev.

SOILBUILD BUSINESS SPACE

REIT | HOLD (UNDER REVIEW)

TARGET PRICE: $0.67

SEPT 19 CLOSE: $0.70

OCBC Investment Research, Sept 19

The Reit manager announced that the trustee of Soilbuild Reit has issued a letter of demand to tenant NK Ingredients on Sept 12 for arrears amounting to $3.4 million.

The trustee holds an insurance guarantee issued in its favour amounting to $5.1 million and called upon the insurance guarantee on Monday.

The balance of the insurance guarantee of $1.7 million is equivalent to about four months of rent.

The Reit manager does not expect there to be a material immediate financial impact on FY17F distribution per unit (DPU). But based on Soilbuild Reit's calculations, assuming the lease with NK Ingredients was terminated as at Jan 1, H1 FY17 DPU would have been 10.7 per cent lower at 2.64 cents instead of 2.955 cents.

We note that the NK Ingredients asset was acquired by Soilbuild Reit on a sale-and-leaseback structure prior to its initial public offering and that the master lease agreement was initially supposed to end on Feb 14, 2028.

Given the uncertainty regarding future income streams for the asset that NK Ingredients currently occupies, we are likely to make downward adjustments to our fair value.

We place our "hold" rating and fair value of $0.67 under review.

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