What Has Fraser And Neave Limited Been Up To?

Fraser and Neave Limited (SGX: F99) used to be a one of the constituent in the Straits Times Index (SGX: ^STI). Sadly, the Fraser and Neave today is only a small part of what it used to be. After the takeover by Thai Beverage Public Company Limited (SGX: Y92), F&N saw its main brewery business being sold to Heineken, its property business is being spin off to become Frasers Centrepoint Ltd (SGX: TQ5) and most recently, it has competed its sale of its Myanmar brewery business which it was forced to sell.

Its share price has also seen the effect of all these negativities.  Since the day after Frasers Centrepoint Ltd is spinoff in January 2014, F&N saw its share price fell from about S$3.48 per share to the current S$2.19 per share, felling 37% in less than two years.

The worst is over?

However, recently we have seen Fraser and Neave Limited started buying back its shares. From September 2015 till now, F&N has bought back more than 2.8 million shares, about 0.2% of its overall outstanding shares from the market. Does it mean management views its share as undervalued?

In term of valuation, F&N still does not look cheap. It is trading at about 2 times its price to tangible book value, bearing in mind that most of its valuable assets such as properties are already spinoff from the company. Moreover, it is trading at more than 100 times its price to earnings ratio. Given that the company is no longer the same Fraser and Neave of the past, it is unsure what will be its normalized earnings in the future.

False hope

Lastly, the market got a pleasant surprise today when a press report surfaced, stating that F&N has offered to purchase a major stake in Vietnam Dairy Products Joint Stock Company (Vinamilk). These gave the market some optimism that maybe Vinamilk can be the next growth engine of the company. Unfortunately, F&N came out with an announcement that that news is inaccurate.

What does it all mean?

With the company shedding assets after assets for the past few years and with its business in Malaysia slowing down, there is hardly any sign of better days ahead for Fraser and Neave. Without a clear growth path for the future, there is really not much reason for the market to be optimistic about the company, regardless of what management feels about the share price.  

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Frasers Centrepoint Ltd.