Lowering RNAV to S$3.21 from S$3.80 We lower our end-FY09 RNAV from S$3.80 to S$3.21 on lower selling prices for its entire property portfolio and the further underperformances of its stakes in listed associates and subsidiaries. APB has underperformed the market in the recent stock-market rally. We estimate that current valuations imply 10-15x FY09 earnings. While we do not have an official view on the stock, we continue to like its business model and ability to generate good cash flowsduring good times and bad. As such, we refrain from marked-to-market valuation for this stock and apply a higher valuation (implying 20x forward earnings) in our sum-ofthe- parts valuation for F&N.
Upgrade to Neutral from Underperform. We also lower our valuation discount gap for F&N from 30% to 20%. We came away from the Hong Kong road show slightly more positive as issues such as a potential rights issue and life after Coke in the F&B segment had been verbally addressed. We believe a higher discount gap at this point may be too negative. However, a 20% discount to RNAV is applied to reflect a potential deterioration of its balance sheet and its holding company structure. While we like the prospects of its F&B segment, significant accretion to RNAV may only come in the longer term, in our opinion. In its property segment, a re-rating of themass market will likely be the key driver for the group this year. A less-nimble balance sheet could pose some obstacles for F&N to increase its prospective NAV when prices start to bottom out.
Following all our adjustments, our target price has been lowered from S$2.66 to S$2.57. The FSSTI has done very well in recent weeks, up by around 25% to 1,820 points since the beginning of March vs. our house target of 1,800. At our target price, the stock is not an Underperform relative to the benchmark index. Upgrade to Neutral from Underperform.
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1 comment:
It proved that it is a worthy company.
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