DBS Group Research 2015-07-07: F&N - MBL VALUATION STILL NOT FORTHCOMING, Maintain HOLD, TP Revised to S$2.74


Maintain HOLD, TP revised to S$2.74. 

  • We reiterate our HOLD recommendation for FNN with a sum-of-parts based TP of S$2.74. 
  • The Group has established brands in the beverage space within the ASEAN region, and is a listed entity owned by TCC Assets/ThaiBev, but there is a lack of visible catalysts for the counter in the near term, in our view. 

MBL valuation still not forthcoming; pricing is key. 

  • Following the arbitration outcome relating to its stake in Myanmar Brewery Limited, an independent valuation is currently underway which is taking longer than we had earlier envisaged. 
  • We estimate that its 55% stake is worth S$1.2bn (S$0.88 per FNN share), based on 21x FY15F PE and believe this should be justified given MBL’s >30% earnings growth in the past several years. 
  • Our basis is also backed by MBL’s leading position and the country’s nascent increase in per capita beer consumption. 

Lowered forecasts by 5% on expectations of slower growth. 

  • The uncertain macro environment, coupled with weaker regional currencies against USD, has undermined consumer confidence in the region. 
  • We have trimmed our net profit forecasts by 5% on expectations of slower topline growth from Malaysia, coupled with the weaker MYR vs SGD. 
  • We are projecting core net profit increase of 7%/14% for FY15F/16F, driven by growth in brewery and dairies. 


  • Our sum-of-parts target price of S$2.74 is derived from the market values of its listed entities, investments and stake in MBL. This equates to c.25.6x FY16F PE, in line with regional consumer peers’ average. 

Key Risks to Our View: 

  • Our sum-of-parts target price is on the basis that the valuation of its 55% stake in MBL is worth S$1.2bn (based on 21x PE). Every S$100m change in valuation will impact our TP by $0.07.

(Andy SIM)

Source: http://www.dbsvickers.com/