KUCHING: Fraser & Neave Holdings Bhd (F&N) has posted a net profit of RM57 million for the first quarter of financial year 2013 (1QFY13) but the group’s future growth strategy is yet to be clarified amid a takeover of 56-per cent owner Fraser & Neave Ltd (FNL) by Thai tycoon Charoen Sirivadhanabhakdi.
The bottom line figure for the quarter was in line with consensus estimates, constituting 21 per cent of full-year forecast, respectively; it grew 18 per cent quarter-on-quarter (q-o-q) and 37 per cent year-on-year (y-o-y).
With regards to the seemingly explosive y-o-y growth, AmResearch Sdn Bhd (AmResearch) remarked, “The underlying strength is attributed to Dairies Thailand’s business recovery back to the pre-floods level (resume to full production in 3QFY12) coupled with higher volume in Indochina.
“More importantly, Diaries Thailand has successfully penetrated Myanmar and is expected to intensify its efforts within Indochina.
“Profitability for Diaries Malaysia increased due to higher exports and favourable raw material prices, despite a slight three per cent decline q-o-q in revenue – impacted by intense price competition,” the research house said yesterday.
For the soft drinks division, profitability was maintained and growth would continue to be well driven by star performers 100 Plus and Seasons, as well as its enlarged portfolio of products, with MyCola and 100PLUS Edge recently launched in November 2012, it added.
Dairies Malaysia started operating at its new manufacturing facility, Pulau Indah in December 2012 and production capacity was increased by 20 per cent.
The packing of the remaining production equipment from the previous manufacturing facility is expected to be completed by 2QFY13, AmResearch stated.
“Thai tycoon, Charoen, has won majority control of Fraser and Neave Singapore. He owns 74 per cent through combined holdings via Thai Beverage PCL and TCC Assets Ltd.
“The takeover offer is now unconditional and the deadline for acceptance of the offer has been extended to February 18.
“Given the change in ownership structure, Kirin Holdings has decided to sell its 15 per cent stake in FNL. Charoen intends to keep FNL listed but should Charoen receive sufficient acceptance to shrink FNL’s public float below 10 per cent, he may decide otherwise,” the research house opined.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted, “The tussle for Fraser and Neave Ltd is coming to a close with OUE and Kirin moving out of the picture.
“It is not clear what the new owner, TCC Asset/Thai Beverage’s growth strategy will be for F&N. Our view is that it is back to business as usual at F&N at the time being without any major expansion plan at this juncture.”
MIDF Research reduced the stock’s target price to RM17.52 per share by applying a lower price earnings ratio (PER) for 2013 of 24.1, representing F&N’s one-year historical average PER.
AmResearch saw a greater emphasis on F&N’s (56 per cent owned by FNL) soft drinks division, underpinned by cross-selling of products moving downstream and both parties cementing a stronger position in Southeast Asia, leveraging on each other’s distribution channel.
The research firm left the fair value unchanged at RM19.18 per share based on a sum-of-parts valuation. The stock was trading at 30 times FY13 forecast PER, higher than its five-year peak of 28 times, it said.