09 August 2014

F&N Quarterly Report Summary - August 2014

Performance Review

Company Comment on Outlook

The global economy is expected to grow modestly in 2014 with the Singapore economy expected to grow at
between 2% to 4%. As global commodity prices are forecasted to remain volatile, it is expected to impact the key raw material costs in the Food & Beverage segment. In addition, consumer sentiments in the markets in which we operate will continue to be affected by the economic climate. Nevertheless, the Group will continue to monitor the situation closely to mitigate the effects of rising costs and to respond in a timely manner to sustain the operating performance of the Group.

Operating conditions for Printing and Publishing remain challenging but efforts to control operating costs are progressing well whilst initiatives to discontinue unprofitable businesses in past years have enabled reinvestment into growth areas.

Other Information

9M14 EPS: 15.0 cents, from continuing operation:  7.9 cents
NAV: $1.15

Expected ROE is around 10% - 15%

The main contributor of net profit growth is from breweries sector (Myanmar bear). As company divested its share in FCL to shareholders, its main focus now is in beverages division. As PB ratio is now around 3.0x which I believe it is a norm for beverage company with lesser CAPEX requirement and higher cash flow generation, the expected annualized PE is around 19X. I would not say it is cheap at current price, but definitely it is in one of my watchlists as it has strong branding value in Asean countries with 100plus as its flagship product in this region. It also really depends on demographic change and changes of taste of end users to switch to healthier products than carbonated drinks. Overall, this is a good result for company. Hopefully the ROE can be higher after a few more quarters later. It is good that if the company can dispose off the printing division if possible as it drags down overall ROE performance. 

A presentation slide prepared by the company can be found here.

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