Despite the looming negative sentiment among shares in Thailand’s beverage sector after the report of new U.S. sanctions against two more state-owned banks in Myanmar — one of the main markets for Thai exports of beverages — analysts anticipate a limited impact and remain positive about the sector since there are no financial transactions with these two banks.
On Wednesday, the US placed new sanctions on Myanmar’s defense ministry and two banks that the ruling military junta has used to import weapons and other supplies from abroad.
The US Treasury Department issued a statement saying the military imported arms, equipment, and raw materials to make weapons to assist its “brutal repression,” and that it relied on outside sources, including Russian organizations under sanctions.
Myanma Investment and Commercial Bank (MICB) and Myanmar Foreign Trade Bank (MFTB), both state-owned institutions, were also subject to sanction.
Krungsri Capital Securities said that it continues to have a positive outlook on the beverage sector. OSP registers the largest revenue contribution from Myanmar at 10%, followed by CBG 9% and SAPPE 0.4%. Due to these three companies having not engaged in any financial transactions with these two Myanmar banks, the impact on their operations is likely to be limited. However, due to the relatively larger share of sales from Myanmar, OSP could be the worst hurt if macroeconomic conditions deteriorate and lead to reduced demand. The brokerage predicts an 8% loss in OSP’s core profit and a 12% drop in CBG’s if sales in Myanmar completely dry up.
The brokerage predicts an 8% loss in OSP core profit, a 7.2% drop in CBG core profit, and a 0.3% drop in SAPPE core profit if sales in Myanmar completely dry up.
Cost pressure eased in 1Q23, therefore CBG’s earnings could rebound. Strong export sales and decreased raw material prices are expected to boost SAPPE and OSP revenue this year. SAPPE is the top sector pick due to robust sales in Thailand and international markets, especially Europe.
