Fraser and Neave - Property remains a key drag

F&B CEO Mr Koh is looking to grow the group’s F&B business organically. The focus will be on developing the soft drinks franchise in Malaysia and Singapore following the cessation of the Coke bottling franchise agreement. Otherwise the group’s brewery business is progressing steadily but with investments in newer markets such as India providing some drag. Longer term, the F&B and property divisions could be de-merged in bid to unlock value. Meanwhile the sale of its printing operations has been put on hold due to poor valuations.


The group has shelved projects in the UK and Australia until markets there stabilise. China is progressing while Singapore is seeing a revival in sales especially in the low-end of the market. Earnings from property, however, will decline with slower sales achieved, although there has been a recent pick-up in volume.


The restructuring of the investment in FCOT is progressing, which could involve the injection of F&N’s commercial properties into FCOT. Although the group has a gearing level of 0.6x, management has reiterated that cashflows remain strong and there is no need for a cash call.


We are update our NAV for F&N with mid-cycle discounts but also mark-to-market the value of its listed companies. The shares are trading at a 36% premium to our updated price target of S$2.67 (from S$2.55). REDUCE rating maintained.

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