Berli Jucker

Berli Jucker Plc (BJC)

Investment thesis: The information we grabbed from CEO Aswin Techajareonvikul at the local NDR puts BJC’s earnings outlook in a clearer perspective. We have factored in new beverage can capacity in Vietnam, the impact of the relocation of a glass factory and a soon-to-acquired distributor in Vietnam and its consequential effect. As such, our FY12-13 earnings estimates have risen by 13% and 25%, respectively. We have increased our YE12 target price to Bt39.5 from Bt23.7 and upgraded our rating to BUY from HOLD.
New capacity to kick in: The new aluminum can factory in Vietnam (to start-up in May 2012) will increase BJC's total can capacity by 40% and is expected to break even in 4Q12, as more than 80% of the capacity has been booked. Given strong demand growth of 20% per year, a second production line, which will double capacity, may start running within two years.
New wing in Vietnam: A deal to buy a distributor with a network concentrated in northern Vietnam is likely to be closed soon. The CEO said the acquisition will increase its number of distribution points five-fold to 250,000, making BJC the largest consumer goods distributor in Vietnam. Assuming the deal is done in mid 2012 and a 51% stake, our FY12-13 profit forecasts would rise by 5% and 8%, respectively. But the impact on earnings should be greater—BJC plans to use this network both to distribute its products in Vietnam and to source items from Vietnam for distribution in Thailand. This model will also be applied to Laos, Cambodia and Myanmar. So, we expect BJC consumer business to grow robustly.
Fatter net margin after relocation: BJC has started a 3-year program to gradually relocate glass furnaces from Rajburana to Saraburi (about one furnace per year). The relocation will fatten net margin, due to greater cost efficiency (from changing the fuel stock from bunker oil to natural gas) and an eight-year BOI tax holiday.
Expanding retail chain: Apart from rolling out book stores and building an e-commerce platform (asiabooks.com and BJCstore.com), the CEO eyes integrating BJC’s healthcare business downstream by building or buying a pharmacy chain. The firm also plans to build a retail business (convenience stores and/or supermarkets) in Vietnam as soon as consumer shopping behavior in that country starts to move toward modern trade.  Key Ratios & Statistics