F&N - A Respite

F&N and Coco Cola have jointly agreed to extend their business relationships till Sept 30 th 2011, reaffirming our earlier concern that breaking up is a lose-lose situation, especially for F&N, as it would mean F&N having to build its own bottling plants and distribution facilities for the small Singapore and Brunei markets. (F&N Bhd can take care of the Malaysian market with its existing facilities.)

Although the problem has merely been deferred, there is nothing to say the new arrangement cannot further be extended come Sept 30th 2011.

The current bottling arrangements in Malaysia, Singapore and Brunei were to have expired on Jan 26th 2010, news of which had negatively affected the stock, and basis for our BUY recommendation then. After a strong recovery, which saw F&N share price cross $4, we believe it would have factored in the good response to its residential projects (8 @ Woodleigh and Woodsville 28, which were sold out in recent 2 weeks.)

We would therefore downgrade the stock to Take Profit.

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