SINGAPORE (May 24): RHB Research likes Fraser & Neave even though the operating environment is tough for its beverage and print business.
“We think there is value in the stock, given that the share price is trading 13% below its $1.96 NAV/share,” says RHB analyst Juliana Cai in a May 23 unrated report.
F&N’s profit is largely helmed by its dairy business, as well as a 20% stake in Vinamilk. It also holds a 55% of F&N Holdings (FNH), in addition to its printing & publishing business.
Cai says value of F&N’s stake in Vinamilk works out to be $1.87/share based on its current share price of $1.73. In addition, its 55% stake in FNH is worth $1.54/share, says Cai.
Additionally, the printing & publishing division, though loss-making, still has a book value of $0.12/share.
“The SOP amounts to $3.53, which is double F&N’s share price,” says Cai.
Year to date, F&N’s dairy business and contributions from Vinamilk continue to drive earnings growth. It also offsets losses from the printing & publishing segment, as well as pre-operating costs incurred for a Myanmar greenfield brewery under the beverage division.
As F&N is looking to increase its stake in Vinamilk, this should also help support bottomline, adds Cai.
F&N is 59.3%-majority owned by TCC Assets and 28.5%-held by Thai Beverage. Both are backed by Thai tycoon Charoen Sirivadhanabhakdi.
Given Thai Beverage’s high net gearing, Cai believes F&N will be used as the Thai tycoon’s main investment vehicle for any future F&B acquisitions.
And with a net gearing ratio of 0.1x as at 2Q19 ended Sept, F&N has ample room to take up more borrowings.
As at 12.18am, shares in F&N are up 0.5 cent at $1.78.
