On 6 August 2024, Fraser and Neave Limited (“F&N”) announced their business update for the third quarter of FY2024. F&N has seen improvement in their operations when compared to the previous financial year, and their dividend continues to be well sustained by their operations and earnings per share. There are also traded at a discount from its book value, which should provide investors a margin of safety.
Do note that on 18 July 2024, there is an announcement that the major shareholder TCC Assets Limited (“TCCAL”) will be doing a share swap with Thai Beverage Public Co Ltd (“ThaiBev”). The share swap will increase TCCAL holdings of Frasers Property Limited (“FPL”) to approximately 86%, which is substantially the majority of the shares available. ThaiBev holdings will then increase to approximately 70% of F&N. It will not be difficult to obtain the remaining shares, especially as TCCAL will hold the remaining 18%. Therefore, there are market speculations that privatizations may occur, though timelines are not available at this point of writing. The share price has increased the last few weeks with the share swap announcement, resulting in a lower dividend yield.
This is the first article covering F&N and therefore there are no comparatives.
General Announcement::9M2024 Voluntary Business Updates (Unaudited)
Background
Fraser and Neave, Limited (“F&N” or the “Group”) had its origins more than a century ago, in the spirited decisions of two enterprising young men, John Fraser and David Neave, who diversified from their printing business to pioneer the aerated water business in Southeast Asia in 1883. From a soft drinks base, F&N ventured into the businesses of beer in 1931, dairy in 1959, property development and management in 1990, and publishing & printing in 2000. In 2012, the Group divested a substantial part of its beer business. In 2013, as F&N celebrated its 130th year of operation, it also welcomed its new majority shareholder, the TCC Group, which is engaged in food and beverage, real estate, industrial trading and consumer products, insurance and agriculture. In January 2014, through a distribution in specie and re-listing of Frasers Property Limited by way of introduction on the Singapore stock exchange, the Group demerged its Properties business.
Today, F&N is a leading Southeast Asian consumer group with expertise and prominent standing in the Food & Beverage and Publishing & Printing industries. Leveraging its strengths in marketing and distribution, research and development, brands and financial management, as well as years of acquisition experience, the Group provides key resources and sets strategic directions for its subsidiary companies across both industries.
Listed on the Singapore Stock Exchange, F&N ranks as one of the most established and successful companies in the region with an impressive array of renowned brands that enjoy strong market leadership. F&N is present in 11 countries spanning Asia Pacific and the Americas, and employs over 7,200 people worldwide.
Financial Highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | +2.1% | No Comparative |
Revenue for the first nine months of FY2024 increased by 2.1% to SGD1,613 million from SGD1,580 million for the same period in the previous financial year. The food and beverage segment drove the Group’s top line growth where revenue increased by 7% in constant currency. Management have disclosed that there were higher volumes for core soft drinks brands due to effective marketing campaigns and their beer segment benefited from an expanded brewery capacity. There are also increase in domestic and export demand in Malaysia and Thailand. Revenue was weighed down by decrease in publishing and printing segment due to lower print demand and closures of retail stores. Overall, the revenue metric is Favorable.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | +35.5% | No Comparative |
The earnings per share for the first nine months of FY2024 increased impressively by 35.5% to SGD0.084 per share as compared to SGD0.062 per share in the previous financial year. This metric remains Favorable and is a good aspect of the dividend stock.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | No Info | No Comparative |
Based on the announcement on 6 August 2024, operating cashflows was not included in the business update for the third quarter of FY2024.
The metrics was Unfavorable in the previous quarter as cashflow generated from operations decreased by 5.1%. For the six months ending 31 March 2024, cash flow generated from operations amounted to SGD140 million, compared to SGD147 million for the same period in the previous financial year. Do note however that for the previous financial year, the cashflow from operations was largely supported by collections of receivables and usage of inventories.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | 34.4% | No Comparative |
Gearing ratio stands at 34.4% as of 30 June 2024. This metric is computed using total assets of SGD5,066 million and total liabilities of SGD1,742 million. The metrics remain Favorable as F&N is less reliant on external sources to fund operations. Do note management have provided a gearing ratio of 19.8% using borrowings less cash and bank deposits over total equity.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest coverage | No Info | No Comparative |
Based on the announcement on 6 August 2024, no detailed breakdown of the financial results to determine the interest coverage was provided in the business update for the third quarter of FY2024.
The interest coverage stands at 7.8 times as of 31 March 2024, using profit before interest and tax of SGD162 million and finance costs of SGD21 million. The metric is Favorable.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.64 | No Comparative |
Based on the announcement on 6 August 2024, net asset value (“NAV”) was not included in the business update for the third quarter of 2024.
The Price-to-book (“P/B”) ratio for F&N is 0.64. This is computed using the Net Asset Value (“NAV”) per share of the Group as of 31 March 2024 of SGD1.98 per share and the closing share price of SGD1.26 as of 6 September 2024. This is Favorable as you will be paying a discount to its book value.
As of 6 September 2024, the Market Capitalization is approximately SGD1,836 million.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 4.37% | SGD 0.055 |
| 2023 | 3.97% | SGD 0.050 |
| 2022 | 3.97% | SGD 0.050 |
| 2021 | 3.97% | SGD 0.050 |
| 2020 | 4.37% | SGD 0.055 |
F&N have been paying relatively consistent dividends over the last few years. With the total dividend payout in 2024 of SGD0.055 per share and using the closing share price of SGD1.26 as of 6 September 2024, this translates to a recurring dividend yield of 4.37%. For my benchmark, a general reasonable yield would be around 5.75%. The dividend yield is thus Unfavorable. Do note that the dividend yield is currently low as the share price had increased recently with the share swap agreement.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
If using dividend yield of 5.75% as a benchmark, based on the dividend of SGD0.055 there is potential for F&N to see its share price drop by another 24.1% to SGD0.96. Investors will need to be mentally prepared that the share price may fall further to match market expectations.
| Yield | Share Price | Downside |
|---|---|---|
| Current (4.37%) | 1.26 | – |
| 5.75% | 0.96 | -24.1% |
| 6.75% | 0.81 | -35.3% |
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +2.1% | Favorable |
| Earnings per share | +35.5% | Favorable |
| Operating Cash Flows | No Info | Unfavorable |
| Gearing ratio | 34.4% | Favorable |
| Interest coverage | No Info | Favorable |
| Price to Book Ratio | 0.64 | Favorable |
| Overall | Favorable |
In conclusion, it is Favorable to invest in F&N. With their sustainable operations and dividend payout, this stock is a good option for those considering adding for its stability while waiting for further news.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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This is the first article covering F&N.
