Analysts cool on F&N Holdings despite billionaire battle for Singapore parent

KUALA LUMPUR (Nov 19): Fraser & Neave Holdings Bhd (FNH) -- whose Singapore-listed parent Fraser & Neave Ltd (F&N) is seeing its stock price surge after receiving competing takeover bids from two billionaires – today gave up some of its gains last week as analysts see muted upside for the Malaysian subsidiary at current juncture.

“For now, FNH remains an underperform with an unchanged discounted cash flow (DCF)-based target price of RM18.60, given that we are uncertain about who will ultimately control its parent company,” CIMB Research said in a note this morning.

Maybank Investment Bank Research (Maybank-IB), meanwhile, retained a “hold” call on FNH but revised its price target from RM20.80 to RM21.20 apiece to account for valuation from the corporate activity.

At midday today, FNH fell 14 sen or 0.73% to RM19.16 on thin trade of only 7,900 shares on Bursa Malaysia. F&N owns 56% of FNH.

At 12.45pm today, FNH’s parent, F&N, was up 8 cents to S$9.36 on the Singapore Exchange after trading between S$9.28 and S$9.38 apiece.

Last Friday (Nov 16), F&N rose 15 cents to close at S$9.28 -- above the S$9.08 offer by Indonesia’s Riady family that trumped an earlier S$8.88 apiece offer by Thai billionaire Charoen Sirivadhanabhakdi. That helped made FNH second on the top gainer’s list on Bursa Malaysia as its shares rose 80 sen or 4.3% to RM19.30 on volumes of about 218,800 shares last Friday.

However, should the Riady family-controlled Overseas Union Enterprise (OUE) gains control of F&N and sells the food and beverage business to Japanese beverage-maker Kirin Holdings Co, CIMB Research said it would upgrade its target price for FNH to RM20.38 apiece.

CIMB’s potential price target of RM20.38 apiece only implies a 6.4% upside potential from current levels while Maybank-IB’s RM21.20 price target implied a 10.6% upside potential.

When topping the Thai billionaire’s offer with its S$13.1 billion offer for F&N last Thursday (Nov 15), OUE had said Kirin buy F&N’s food & beverage unit from OUE, sell its 14.8% of F&N to OUE and won’t accept any competing deal. A property developer, OUE’s interest is in F&N’s real estate business, Fraser Centrepoint Ltd.

“At the [OUE’s] offer price of S$9.08 per share, Kirin’s 14.8% stake in FNH is worth S$1.9 billion, hence we think the acquisition of the F&B business should materialise if OUE succeeds,” Maybank-IB wrote in a note this morning.

“If OUE wins and Kirin buys the F&B business for S$2.7 billion, we believe Kirin would then need to make a general offer (GO) for FNH as the majority (90%) of the non-beer F&B business of F&N Group arises from FNH and there will have been a change in the major shareholder for FNH,” CIMB wrote in its Nov 19 note.

However, CIMB added that Kirin's GO for FNH still hinges on getting FNN shareholders' approval if OUE is not able to secure 100% acceptance of the offer and FNN remains listed in Singapore.

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