Wednesday 18 July 2012

Fraser & Neave - Entry of TCC Group? Hold


-  According to a joint statement on the Singapore Stock Exchange, Oversea-Chinese Banking Corporation Ltd (OCBC) and Great Eastern Holdings Ltd (GE) announced that they have been approached by TCC Group to sell their combined 18.2% stake in Fraser & Neave Ltd (F&NL) and 7.92% stake in Asia Pacific Breweries Ltd (APB). 

-  F&NL is the parent company of Fraser & Neave Holdings (F&NH) with a 56.3% equity stake.  TCC Group (TCC) is a conglomerate with various interests ranging from insurance to property development. TCC also owns Thai Beverage Pcl –Thailand’s biggest beer and whisky producer. 

-  Based on last closing prices, the combined stakes owned by OCBC and GE in F&NL and APB are valued at circa SGD2.1bil and SGD756.6mil, respectively.

-  Though still in the preliminary stage, it is worth noting that the potential change in the shareholding structure could trigger a battle for control at both F&NL and APB. Kirin Holdings Co is F&NL’s largest shareholder with a 14.97% stake. Over at APB, Heineken NV and F&NL own 42% and 40% of the group, respectively.     

-  Despite this, we reckon this development is unlikely to have a significant impact on operations at F&NH, at least for the medium term. F&NH is the dominant contributor to the parent company’s revenue at 59%, while its property development arm accounts for 38% and publishing & printing operations at 3%.

-  As it is, note that F&NH’s long-term strategies have been underscored by its aim to become a stronger F&B player in the region. Dairies operations which make up the bulk of the group’s earnings are poised for a full recovery, following re-commencement of operations after the flooding in Bangkok.

-  We maintain our Hold rating on F&N for now, with an unchanged DCF-based fair value of RM18.10/share, pending upcoming quarterly results.

Source: AmeSecurities

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