Fraser and Neave
Posted: Mon May 12, 2008 2:45 pmFrom Kim Eng:-
Fraser & Neave 1HFY2008 results (Gregory YAP, DID: 64321450)
Previous Day Closing price: $4.92
Recommendation: Buy (maintained)
Target price: $6.00 (maintained)
Keeping within the band
F&N reported 1H08 net profit rose 11% YoY to $201m, up from $181.5m a year ago (against our full year PAT forecast of $422m). Similarly, PBIT rose 10% to $406m (full year forecast: $857m).
Organically however, PAT and PBIT soared 25% and 23% respectively as 1H07 results included several non-recurring items (see table).
Growth was driven by recognition of Singapore residental projects, the acquired Nestle business, stronger soft drinks sales and better commercial property contributions.
The Star Performers
Dairies (PBIT +99%; 4% of total PBIT) did the best, with growth mainly from the acquisition of Nestle’s tinned milk business in Feb 2007. Despite rising raw material costs, margin improved YoY to 2.9%.
Investment property and REIT (PBIT +45%; 24% of PBIT)) continued to benefit from high occupancies and positive rental reversion. Adjusted for a one-off $16m revaluation surplus from Malaysian and UK associates in 1H08 and $4.5m in one-off gains in 1H07, PBIT climbed 30%.
Soft drinks (PBIT +21%; 8% of PBIT) benefited from stronger seasonal sales, higher ASP and effective brand building.
Printing & Publishing + Glass Containers (PBIT +15%, 7% of PBIT). P&P margin improved despite lower sales due to selective price increases and supply chain initiatives, while glass containers benefited from higher volume with a new glass plant in Thailand.
Breweries (PBIT +11%, 26% of PBIT) achieved volume and profit growth in almost all markets except China, Mongolia, India & Sri Lanka (mainly gestation losses). Excluding gestation losses and forex differences, organic earnings was a bubbly 20% higher.
Development property (31% of PBIT) registered an 11% fall in PBIT mainly because of the 1H07 one-off gains mentioned above. Following adjustments, PBIT rose 12%. Development profit for FY08 is secured due to past fully-sold projects but F&N cautioned that future sales volume will fall (0nly 256 units were sold in Singapore in 1H08 vs 900 in 1H07) and new launch margins will normalise at 15-20% (vs >30% for projects launched in 2006-07) due to higher construction costs.
Maintain BUY
F&N’s growth engines are still turning over smoothly on the present business mix.
But the search for a CEO continues and F&N must appoint one by year-end, else investors will begin to question its future direction, especially if the main profit generator, Singapore development property, starts to falter badly.
Fraser & Neave 1HFY2008 results (Gregory YAP, DID: 64321450)
Previous Day Closing price: $4.92
Recommendation: Buy (maintained)
Target price: $6.00 (maintained)
Keeping within the band
F&N reported 1H08 net profit rose 11% YoY to $201m, up from $181.5m a year ago (against our full year PAT forecast of $422m). Similarly, PBIT rose 10% to $406m (full year forecast: $857m).
Organically however, PAT and PBIT soared 25% and 23% respectively as 1H07 results included several non-recurring items (see table).
Growth was driven by recognition of Singapore residental projects, the acquired Nestle business, stronger soft drinks sales and better commercial property contributions.
The Star Performers
Dairies (PBIT +99%; 4% of total PBIT) did the best, with growth mainly from the acquisition of Nestle’s tinned milk business in Feb 2007. Despite rising raw material costs, margin improved YoY to 2.9%.
Investment property and REIT (PBIT +45%; 24% of PBIT)) continued to benefit from high occupancies and positive rental reversion. Adjusted for a one-off $16m revaluation surplus from Malaysian and UK associates in 1H08 and $4.5m in one-off gains in 1H07, PBIT climbed 30%.
Soft drinks (PBIT +21%; 8% of PBIT) benefited from stronger seasonal sales, higher ASP and effective brand building.
Printing & Publishing + Glass Containers (PBIT +15%, 7% of PBIT). P&P margin improved despite lower sales due to selective price increases and supply chain initiatives, while glass containers benefited from higher volume with a new glass plant in Thailand.
Breweries (PBIT +11%, 26% of PBIT) achieved volume and profit growth in almost all markets except China, Mongolia, India & Sri Lanka (mainly gestation losses). Excluding gestation losses and forex differences, organic earnings was a bubbly 20% higher.
Development property (31% of PBIT) registered an 11% fall in PBIT mainly because of the 1H07 one-off gains mentioned above. Following adjustments, PBIT rose 12%. Development profit for FY08 is secured due to past fully-sold projects but F&N cautioned that future sales volume will fall (0nly 256 units were sold in Singapore in 1H08 vs 900 in 1H07) and new launch margins will normalise at 15-20% (vs >30% for projects launched in 2006-07) due to higher construction costs.
Maintain BUY
F&N’s growth engines are still turning over smoothly on the present business mix.
But the search for a CEO continues and F&N must appoint one by year-end, else investors will begin to question its future direction, especially if the main profit generator, Singapore development property, starts to falter badly.
). Capitaland has been very innovative in unlocking a lot of shareholder value and I was wondering if F&N can do the same for it's sprawling empire and reitization is probably an avenue, tho' agree timing now is not ideal. LHY joining as chairman should bode well for the counter, I think.