-  We reaffirm our HOLD recommendation on Fraser & Neave Holdings (FNH), with an unchanged fair value of RM19.18/share, based on a derived sum-of-parts valuation.

-  Stripping off the exceptional items, 9MFY13 normalised net profit came in at RM162mil (+12% YoY), on the back of 3QFY13 normalised net profit of RM51mil (-7% QoQ, -2% YoY). While this represents 75% of our estimates and 70% of consensus’, we deemed the results to be within expectations.

-  During the quarter, the group recognised a one-off exceptional item arising from a business interruption insurance claim of RM18mil relatedto Dairies Thailand’s flood last year.

-  On a YoY basis, revenue grew by a strong 13%, thanks to the stronger performance of soft drinks and Dairies Thailand after the flood recovery. Seasonal sales promotion has allowed the soft drinks division to maintain its position, growing by 8%. However, the intense price competition experienced in Dairies Malaysia led to a 6% decline in revenue.

-  Sequentially, while revenue grew by 3%, sales from the soft drinks division fell marginally by 1%. The improvement was mainly contributed by Dairies Thailand on the back of higher sales (+7%).

-  As a recap, two new products, Oishi Green Tea (4 variants) and the improved (and formulated) Seasons NutriSoy soya bean, were introduced during the quarter. The Oshi products were as a result of an exclusive Distribution Agreement entered by the group and Thai Beverage Group following the recent takeover of the parent company.

-  Should Thai Beverage Group’s products be well-accepted in Malaysia, we do not rule out the possibility of greater synergies in cross selling of Thai Beverage’s products, bolstered by the commonality and strong distribution of both parties.

-  No change to our FY13F-FY15F earnings assumption. Our EBITDA margin assumption continues to be at the 10% level. The stock is currently trading at a 31x PE of FY13F, above its 5 year historical average of 28x.

Source: AmeSecurities