Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Fraser & Neave Holdings Bhd
(Oct 12, RM16.22)
Recommend buy at RM16.30 with fair value of RM20.40: Fraser & Neave Holdings (F&N) has ceased the production of dairy products at its Thai plant in Ayutthaya due to severe flooding, according to the latest announcement on Bursa Malaysia.
The group halted operations at the Thai plant yesterday morning and is currently still in the process of assessing the extent of the damage.
Ayutthaya is one of the areas affected by the floods in Thailand due to its location in the vicinity of three rivers ' Lop Buri, Pasak and Chao Phraya. The ongoing floods in Thailand are the worst in more than 50 years as flood waters have hit 60 of the country's 77 provinces in the past two months.
Dairy operations make up 51% of group revenue but only 26% of group operating profit. Its better margin Thai arm contributes 14% to group revenue and 16% to group operating profit (1HFY11).
We understand the group has property all-risk and business interruption insurance cover for its Thai operations.
Based on our channel checks, we understand other factories in the vicinity are looking at a potential downtime of one to two months for repairs and obtaining replacement parts and components.
Our back-of-envelope calculation indicates a potential earnings revision of 5% to 5.5% to our FY12F forecast, assuming a two-month downtime. This would trim our fair value by 94 sen per share.
We make no change to our earnings estimate and fair value of RM20.40 per share at this juncture, pending a meeting with management. Our fair value is based on a price-earnings ratio of 18 times CY12F earnings ' at the top end of the stock's PER trading band and backed by our discounted cash flow value of RM20.88 per share (weighted average cost of capital: 9.6%, long-term gain: 2%). ' AmResearch, Oct 12
This article appeared in The Edge Financial Daily, Ocotber 13, 2011.
Company Name: FRASER & NEAVE HOLDINGS BHD
| Research House: AMMB | Price Call: BUY | Target Price: 20.40 |
Fraser & Neave Holdings Bhd
(Oct 12, RM16.22)
Recommend buy at RM16.30 with fair value of RM20.40: Fraser & Neave Holdings (F&N) has ceased the production of dairy products at its Thai plant in Ayutthaya due to severe flooding, according to the latest announcement on Bursa Malaysia.
The group halted operations at the Thai plant yesterday morning and is currently still in the process of assessing the extent of the damage.
Ayutthaya is one of the areas affected by the floods in Thailand due to its location in the vicinity of three rivers ' Lop Buri, Pasak and Chao Phraya. The ongoing floods in Thailand are the worst in more than 50 years as flood waters have hit 60 of the country's 77 provinces in the past two months.
Dairy operations make up 51% of group revenue but only 26% of group operating profit. Its better margin Thai arm contributes 14% to group revenue and 16% to group operating profit (1HFY11).
We understand the group has property all-risk and business interruption insurance cover for its Thai operations.
Based on our channel checks, we understand other factories in the vicinity are looking at a potential downtime of one to two months for repairs and obtaining replacement parts and components.
Our back-of-envelope calculation indicates a potential earnings revision of 5% to 5.5% to our FY12F forecast, assuming a two-month downtime. This would trim our fair value by 94 sen per share.
We make no change to our earnings estimate and fair value of RM20.40 per share at this juncture, pending a meeting with management. Our fair value is based on a price-earnings ratio of 18 times CY12F earnings ' at the top end of the stock's PER trading band and backed by our discounted cash flow value of RM20.88 per share (weighted average cost of capital: 9.6%, long-term gain: 2%). ' AmResearch, Oct 12
This article appeared in The Edge Financial Daily, Ocotber 13, 2011.
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