Fraser and Neave Limited From the Perspective of a Value Investor

Fraser and Neave Limited (SGX: F99), which is also known as F&N, is a food & beverage company. It has many brands under its portfolio, ranging from carbonated beverages to ice creams and even soy-milk drinks.

Some of the company’s more prominent brands include 100PLUS, F&N, F&N NUTRISOY, F&N MAGNOLIA, and more. If you think F&N’s products are found only in Singapore, you will be surprised to know that the company also has a presence in other Southeast Asian countries such as Malaysia, Thailand, Indonesia, and Vietnam.

Apart from its food & beverages business, F&N also has a publishing arm under its wings – Times Publishing. This subsidiary is mostly involved with the publishing, printing, distribution, and retailing of books.

Value investors tend to look at four ratios, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the net-debt to equity ratio, and the dividend yield. Let’s see what these four ratios can tell us about F&N.

The company’s shares are currently trading at a price of S$2.00. Based on its latest finances (for the 12 months ended 31 March 2016), F&N has trailing earnings of S$0.42, thus giving rise to a P/E ratio of just 4.7. This is much lower when compared to the SPDR STI ETF (SGX: ES3). The exchange-traded fund tracks the fundamentals of the Straits Times Index (SGX: ^STI) and has a P/E of 11.4.

But, it should be noted that F&N’s trailing earnings included gains from the sale of certain businesses. If that were stripped away, F&N’s continuing operations only generated trailing earnings of S$0.034 per share, which implies a P/E ratio of 58.

Moving on to the P/B ratio, at end-March 2016, F&N had a net asset value (NAV) per share of S$1.73, indicating a P/B ratio of 1.15. What this means is that investors are paying S$1.15 for every S$1 of net assets (total assets minus total liabilities) that the company owns. And again for some perspective, the SPDR STI ETF has a P/B ratio of 1.12.

In looking at F&N’s balance sheet, it shows that the company has total debt of S$144.3 million on its books at the moment. In comparison, it has S$964 million in cash and equivalents. This means that F&N is comfortably in a net cash position, thus making the net-debt to equity ratio moot.

Lastly, F&N paid a dividend of S$0.05 per share for its fiscal year ending 30 June 2015 (fiscal 2015). In the first-half of fiscal 2016, F&N had declared an interim dividend of S$0.015 per share, down from the S$0.02 that was seen in the previous year.

If the company pays out the same absolute sum in dividend for fiscal 2016, it would result in a dividend yield of 2.5%. This is lower when compared to the SPDR STI ETF which has a dividend yield of 3.6%.

From the four metrics above, it looks like F&N may not look good to value investors. But, this should serve merely as a starting point for investors to dig deeper into F&N’s financials and future prospects.

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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 contributor Esjay owns units in the SPDR STI ETF.