Carabao (CBG) the energy drink maker has been a sensation since listing its shares in November 2014 at 28 baht per share. In the last six years, its revenue has doubled to almost 15 billion per year, whereas annual profit has risen 240 per cent to 2.9 billion baht in 2019.
Holding a top market share in the energy and sports drinks market in Thailand, it has added new markets in the neighboring CLMV countries. Three years ago, investors were a bit disappointed when it failed to deliver substantial growth from China.
However, since then it has demonstrated strong gains in the CLMV market, its recent share price rise has come from launch of a new health drink “Woody C+” Lock” — promoted in association with famous television and health consultant Woody Milintanchinda.
CBG’s earlier success also came from its key drink Carabao, launched in association with a famous Thai Singer with the same name. Woody is one Thailand’s leading influential personality. Investors are betting that the Woody C+ Lock drink will more than soften the slowdown by the pandemic.
Analysts are projecting a 15-17 per cent rise in profit this year and another 8-10 per cent next year. What is interesting to note here is that CBG ‘s customer focus is the low-end mass market — which has been badly hit by Covid pandemic.
While the Woody C+ Lock may revive new product sales, a large segment of Thailand’s mass market — its tourism industry — are suffering exponentially from the disappearance of tourists and job losses.
Although CBG’s strong brand franchise, and rising share in the CLMV market deserves premium rating, it may not be all be a bed of roses in the backdrop of the COVID-19 pandemic. We remain cautious, and recommend investors take profit and wait for a correction.
Reality check – soft drink giants such as Coca Cola and PepsiCo saw sales slump in April and a recovery in May, but volume sales in June and July are down year on year.
