Thai tycoon applies "fry it with its own fat" strategy at Sabeco to pay interest

(Dan Tri) - Although Sabeco has paid out 35-50% dividends for many years, the amount of money ThaiBev receives is still not enough to cover the huge interest expense from the $5 billion debt for the acquisition.

Having paid up to 320,000 VND/share to "take over" the largest beer company in Vietnam, the Thai tycoon, despite receiving huge annual dividends, still cannot cover the loan interest.

Sabeco maintains 35-50% dividend for many consecutive years

In 2017, the Sabeco divestment deal shocked the market. At that time, Thaibev (through its subsidiary Vietnam Beverage) spent up to VND110,000 billion, equivalent to USD4.8 billion, to buy all 343.66 million SAB shares that the Ministry of Industry and Trade put up for auction, thereby taking control of Sabeco.

Each Sabeco share was priced at 320,000 VND by Thai investors, higher than the market price of about 309,000 VND/share - which was among the most expensive in the stock market at that time.

Since falling into the hands of Thai billionaire Charoen Sirivadhanabhakdi, Sabeco has maintained a policy of paying regular cash dividends. The company usually pays out at 35%, but in 2018 and 2022, this rate will increase to 50%.

In 2023, Sabeco will issue bonus shares at a ratio of 1:1, thereby doubling its charter capital, and will continue to pay a cash dividend of 35%. By 2024, the company will again increase the cash dividend payout ratio to 50%.

In total, from 2017 to now, ThaiBev has received more than 14,000 billion VND in dividends from Sabeco.

According to a recent assessment by Dragon Capital Securities (VDSC), Sabeco will likely continue to maintain a high cash dividend rate, fluctuating between 35-50% in the coming years.

The reason is that the company currently has no significant new investment plans. In addition, according to VDSC, the large dividend payment also helps ThaiBev offset the 2.4-3%/year interest expense for the $4.8 billion loan used to acquire Sabeco.

However, VDSC estimates that the total dividends that ThaiBev has earned since 2018 are still not enough to cover the interest expense for this deal. This shows that the burden of principal and interest debt until 2028 continues to be a pressure forcing Sabeco to maintain a high dividend policy in the past as well as in the coming years.

Assumptions of dividends received and interest payable by Thaibev related to the Sabeco acquisition deal (Photo: VDSC Report).

ThaiBev still hasn't fully paid off the interest from the 110,000 billion VND deal.

In 2017, to finance the acquisition of Sabeco, ThaiBev and its subsidiary BeerCo borrowed nearly $5 billion at an average interest rate of 2.5-3% per year. The main loan, worth $4.8 billion, had a term of two years, and was then refinanced in 2018 by issuing bonds worth 83% of the deal, with a term of two to ten years, and an interest rate of 1.76-3.6% per year.

According to estimates by Dragon Capital Securities (VDSC), the total cash dividends that ThaiBev will receive from Sabeco in the 2018-2025 period will be approximately VND14,090 billion. However, the interest expense for the debt financing this deal is expected to be up to VND17,881 billion, which is nearly VND3,800 billion higher than the dividends received.

VDSC believes that the pressure to repay principal and interest is the reason why Sabeco has maintained a high dividend payout rate for many years. However, the continuous large dividend payout also causes Sabeco's asset size to decrease, with an estimated CAGR of -7.2%/year in the period 2024-2029.

Source: https://dantri.com.vn/kinh-doanh/dai-gia-thai-ap-dung-chien-thuat-mo-no-ran-no-tai-sabeco-de-tra-lai-20251020101308224.htm