Fraser and Neave

[winston]

From Kim Eng:-

Fraser & Neave – 1Q09 Results (Gregory YAP 64321450) Previous day closing price: $2.90
Recommendation: Buy (maintained)
Target price: $3.36 (reduced from $3.95)
Fundamentally sound

1Q09 profit plunged 50% yoy to $52m, mainly due to fair value revaluations of its property business. Negative revaluation of overseas projects carved out almost $39m in profit, although this was offset by $37m in revaluation and exceptional gains. Operationally, earnings fell only 6% yoy to $86m. The F&B business, except Dairy, stayed resilient, with exceptional growth from Breweries.

F&B continued to outperform
F&B PBIT rose 9% yoy to 50% of group profits, led by soft drinks (+19%) and breweries (+13%). Margins improved on higher volumes, price increases and in certain countries such as Papua New Guinea and China, currency appreciation as well. However, dairies were hit by lower export sales and lower domestic sales in Thailand, due to the melamine scare and weaker economic conditions.

Property the poorer cousin now
Investment property PBIT (which now includes REITs) is estimated to have risen 12% to $44m but was dragged down by F&N’s share of FCOT’s losses ($19.5m) and revaluation loss from a UK hospitality property ($7.5m), leading to a 57% plunge. Meanwhile, development PBIT fell 37% due to lower sales in UK and Australia, absence of contribution from three completed properties (Raintree, Azure and One Leicester) and a $11.7m allowance for foreseeable loss on an overseas project. Excluding this provision, development PBIT fell 19% to $53m.

F&B to lead growth
We expect F&B to continue to grow, especially breweries and soft drinks, and this will now be the mainstay of the group given property’s troubles. As for property, sales and timing of future launches may not meet expectations. We note Caspian’s strong sales but expect a small loss at the initial launch price of $580 psf (but breakeven at $600 psf).

Still attractive value
We have cut FY09 forecast by 26% and RNAV to $3.36. However, we reckon F&N’s pursuit of a business mix rebalancing to even out property volatility could yield some catalysts. Further, we reckon at the current share price, further fair value revaluations have been accounted for. Maintain BUY.

[winston]

From CIMB:-

Fraser & Neave (S$2.90) - 1Q09 results - -Balance-sheet risks mounting

Below. 1Q09 core net profit of S$71.4m forms 17% of our full-year forecast as lower property bookings and weaker dairy income due to the melamine scare proved to be drags. We believe results were below consensus as well.

Property slowed while melamine scare dampened festive cheer. 1Q09 revenue fell 6% yoy to S$1.2bn as property contributions retreated while there was lower demand for dairy products due to the melamine scare.

Soft drinks and brewery, as expected, did well due to year-end festivities but the outlook remains uncertain.

Development revenue fell 29% yoy to S$220m as lower presales were booked in the quarter. The deferment of
launches in the struggling UK and Australia markets could be additional causes.

Printing and Glass continued to underperform.

Taking the lead in forsaking margins for volume. Over 300 units of Caspian have been sold at ASPs of S$600psf vs. S$750psf for Lakeshore. While F&N has taken the first step to clear inventory at reduced prices, we struggle to find profits at this level.

There was little sales progress at partially sold Woodsville 28 and Martin Place. We believe further price cuts could surface in the near term.

Pressure mounting on balance sheet. Net gearing at 1Q09 was 0.66x, within the upper bound of its big-cap property peers. Potential write-downs of F&N’s UK and Australia properties could lift this ratio. While we take comfort in guidance that refinancing for over S$1bn of the S$1.7bn worth of maturing debt has been secured, risks of off-balance sheet commitments to re-capitalise FCOT remain, with the latter needing to retire over S$620m of maturing debt in 2009. A short-term loan of S$70m has already been given to the REIT. It remains to be seen if FCOT can successfully monetise its Japanese and Australian assets to pare down debt.

Further risk of RNAV erosion; maintain Underperform. We lower our FY09-11 core EPS estimates by 0-19% to factor in slower inventory turnover and F&B income.

We also reduce our end-CY09 RNAV by 13% to S$3.80 to account for:-
1) potential capital drains to recapitalise FCOT;
2) lower valuations for its stakes in listed entities; and
3) lower ASPs.

We continue to peg our target price at a 30% discount to RNAV to reflect its holding company structure and rising risks of asset write-downs. Accordingly, our target price drops to S$2.66 from S$3.09.

[LenaHuat]

CIMB is pegging F*N's TP to RNAV, which is I what I has in mind abt it : It's a property play and no longer a real hybrid player.

[millionairemind]

Brokers' Take

Fraser & Neave
Feb 17 close: $2.72
CIMB-GK, Feb 16

FIRST quarter 2009 core net profit of $71.4 million forms 17 per cent of our full-year forecast as lower property bookings and weaker dairy income due to the melamine scare proved to be drags. We believe results were below consensus.

1Q09 revenue fell 6 per cent y-o-y to $1.2 billion as property contributions retreated while there was lower demand for dairy products due to the melamine scare. Soft drinks and brewery did well due to year-end festivities but the outlook remains uncertain.

Development revenue fell 29 per cent y-o-y to $220 million as lower presales were booked in the quarter. The deferment of launches in the struggling UK and Australia markets could be additional causes. Printing and glass continued to underperform.

Taking the lead in forsaking margins for volume: Over 300 units of Caspian have been sold at an average selling price (ASP) of $600 psf versus $750 psf for Lakeshore. While F&N has taken the first step to clear inventory at reduced prices, we struggle to find profits at this level. There was little sales progress at partially sold Woodsville 28 and Martin Place. We believe further price cuts could surface in the near term.



Net gearing at 1Q09 was 0.66 times, within the upper bound of its big-cap property peers. Potential write-downs of F&N's UK and Australia properties could lift this ratio.

While we take comfort in guidance that refinancing for over $1 billion of the $1.7 billion worth of maturing debt has been secured, risks of off-balance sheet commitments to re-capitalise Frasers Commercial Trust (FCOT) remain, with the latter needing to retire over $620 million of maturing debt in 2009.

A short-term loan of $70 million has been given to the Reit. It remains to be seen if FCOT can successfully monetise its Japanese and Australian assets to pare down debt.

We lower our FY09-11 core EPS estimates by 0-19 per cent to factor in slower inventory turnover and F&B income. We also reduce our end-CY09 RNAV by 13 per cent to $3.80 to account for: 1) potential capital drains to recapitalise FCOT; 2) lower valuations for its stakes in listed entities; and 3) lower ASPs.

We continue to peg our TP at a 30 per cent discount to RNAV to reflect its holding company structure and rising risks of asset writedowns. Accordingly, our TP drops to $2.66 from $3.09.
UNDERPERFORM

[ichew]

http://info.sgx.com/webcorannc.nsf/d21c ... enDocument

Fraser and Neave, Limited (the "Company") attaches, for information, an announcement made on 18 February 2009 by Fraser & Neave Holdings Bhd ("F&NHB"), a subsidiary in which the Company has a shareholding interest of approximately 57.9%, in relation to the non-renewal of the Bottler's Agreements and Distributor's Agreement entered into by subsidiaries of F&NHB with The Coca-Cola Company.

hmmm bad news

[cif5000]

The questions that come to my mind.
1. Would they pull the Singapore plug?
2. When is the expiry date for the Singapore contract?
3. To whom is the new contract going to? I thought of YHS but they are running on pepsi.

[winston]

From Kim Eng:-

3) Fraser & Neave – Company update (Gregory Yap DID: 6432 1450)
Previous Day Closing price: $2.68
Recommendation: HOLD (reduced from Buy)
Target price: Under review

F&N Malaysia, F&N's 57.9%-owned Bursa Malaysia-listed subsidiary, announced late last night that The Coca Cola Company will not renew its bottling agreement with it when the previous agreement expires in Jan 2010. While this will not affect FY Sep 2009 results, it is quite likely to have a material impact on FY Sep 2010. We are in the process of working out the financial impact and the change to our present Buy recommendation. We reckon the impact will be material and it is quite likely that we will downgrade the stock to a Hold.

The soft drinks business of F&N Malaysia accounted for 33% of its FY Sep 08 revenue and 48% of operating profits. About 35% of revenue comes from Coca Cola products, with the remainder from F&N brands such as 100Plus, F&N carbonated soft drinks and Asian still drinks such as Seasons and Fruit Tree.

F&N Group in Singapore derives about 10% of revenue and 7% of its operating profit from the soft drinks business, substantially all of which is derived from F&N Malaysia.

[winston]

Singapore Hot Stocks-Fraser & Neave off on Coke concerns

SINGAPORE, Feb 19 (Reuters) - Singapore beverage and property conglomerate Fraser and Neave (F&N) fell more than 7 percent on Thursday on concerns the firm may lose the rights to bottle and distribute Coca Cola products in the region.

F&N's Malaysian unit, which is listed in Kuala Lumpur, on Wednesday said Coca-Cola Co will not extend a bottling agreement due to expire in January, triggering concerns the whole group could lose the rights for soft drinks such as Coke and Sprite.

A dealer at a Singapore brokerage said F&N's property portfolio had been hard hit and investors were banking on the defensive consumer beverage business in the downturn.

"Though it (the contract termination) won't have much impact, it's a disappointment," he said.

"At F&N's group level, we estimate Coke's products account for 4 percent of revenue and about 3 percent of operating profit contribution," DBS Vickers said in a report.

"While the impact seems to be relatively minor to F&N, the termination of the agreement in Malaysia does not seem to bode well for the group," it added.

By 0635 GMT, F&N was down 6.3 percent at S$2.51, underperforming the benchmark Straits Times Index <.FTSTI>, which was down 1.1 percent.

[ichew]

The questions that come to my mind.
1. Would they pull the Singapore plug?
2. When is the expiry date for the Singapore contract?
3. To whom is the new contract going to? I thought of YHS but they are running on pepsi.

hi cif5000
still dont know how to answer ur questions
but F&N had a reply on it ...

http://info.sgx.com/webcoranncatth.nsf/ ... penelement

i need to digest a bit first ...

a glance seems to say since coke dont allow F&N to distribute then F&N wont allow coke to produce & distribute their soft drinks too ...

[cif5000]

Reading between the lines.
1. Coca Cola (the drink) is bottled by F&NCC.
2. F&NCC is owned by Coca Cola (the company).
3. F&N drinks are manufactured by F&NCC.
4. F&N doesn't want to let profit flow to F&NCC and therefore ends contract in 2010.
5. Coca Cola (the company) plays tit-for-tat.
My take, buy orchard parade.