Then and Now: Is Fraser and Neave Limited an Investment Opportunity Now? – Part 1

The century-old Fraser and Neave Limited (SGX: F99) has undergone its fair share of changes over the past five years.

In its financial year ended 30 September 2010 (FY2010), the company, which is better known as F&N, resembled a hulking conglomerate with interests in property development, printing and publishing, breweries, dairies, and soft drinks.

Today, its business is centred mainly on beverages, dairies, and printing and publishing.

Needless to say, much has changed with the company since FY2010. With this in mind, it may be instructive to see how F&N has evolved in order to better understand whether it could be an investing opportunity today.

Then and now

Let’s start off with F&N’s business segments. The graph below summarizes the evolution in F&N’s revenue from FY2010 to FY2014.

F&N Business Segment

Source: F&N’s earnings report; FY2010 beverages consists of soft drinks alone

As you can see in the chart above, the development property (light blue line) and commercial property (purple line) business segments used to command a large share of F&N’s revenue.

This changed with the listing of Frasers Centrepoint Ltd (SGX: TQ5) on 9 January 2014. The listing saw shareholders of F&N receiving two shares of Frasers Centrepoint for each share of the former that they own. Following the spin-off, F&N would no longer have any financial stake in Frasers Centrepoint.

Prior to Frasers Centrepoint’s listing, F&N had sold its stake in Asia Pacific Breweries (home of the popular Tiger brand of beers) to Heineken N.V. in 2012, resulting in the removal of the Breweries segment from F&N’s financials in FY2013.

That’s not all: as my Foolish colleague Stanley noted previously, F&N’s Myanmar Brewery stake (housed under the Beverages segment) may also have to be sold to Myanma Economic Holdings Limited (a company tied to Myanmar’s military). According to a newswire report, Myanmar Brewery is prized for its 83% market share in the Myanmar beer market.

Let’s take a look next at F&N’s profits from its various business segments.

F&N PBIT Profits

Source: F&N’s earnings report

Given the evolution of the profit before interest and taxes (PBIT) that F&N’s various business segments had seen, it’s not unreasonable to assume that the main profit contributors for F&N in the future will be from the Beverage and Dairies segments.

To be sure, this may not be clear cut yet due to the potential forced-sale of F&N’s stake in Myanmar Brewery as mentioned earlier. At the moment, it’s notable that the beverage segment (which – as a reminder – houses F&N’s stake in Myanmar Brewery) also has the fatter profit margins in comparison to the dairies segment; a forced sale of its interest in Myanmar Brewery may yet affect F&N’s profits in the future.

Meanwhile, profits from F&N’s printing and publishing segment have been rather lackluster despite its notable revenue contribution.

Looking forward

During the Frasers Centrepoint spin-off, F&N’s major shareholder Thai Beverage Public Company Limited (SGX: Y92) stated that it was looking to leverage the product portfolio, distribution networks, and product development capabilities between Thai Beverage and F&N to “solidify F&N’s position as a leading consumer group in South-east Asia.”

On another bright note, the long term agreement between Fraser and Neave Holdings Bhd. and Nestle Group grants F&N the manufacturing and distribution rights for a variety of consumer food brands such as Carnation, Bear Brand, Bear Brand Gold, Ideal Milk, and Milkmaid in ASEAN nations including Singapore, Thailand, Malaysia and Brunei.

These developments may help provide revenue stability for F&N as it repositions itself for the future.

Following the story so far? Click here for more on F&N’s evolution!

For more (free!) stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.