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.
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.
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.
Showing posts with label Fraser and Neave. Show all posts
Showing posts with label Fraser and Neave. Show all posts
Tuesday, February 17, 2009
Monday, February 16, 2009
Fraser & Neave 1Q09 Results - BUY (Kim Eng)
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.
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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