Previous day closing price: $2.90
Recommendation: Buy (maintained)
Target price: $3.36 (reduced from $3.95)
Yield: 2008 - 4.3%, 2009F - 3.5%
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 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.
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.
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