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Fraser and Neave Limited Plans To Play Catch Up With Acquisitions

According to news reports, Fraser and Neave Limited (SGX: F99) is looking for ways to boost its market share in the region, including acquisitions. This comes at a time when Fraser and Neave has improved its balance sheet; the company carries a net-cash position of S$835 million as of 30 June 2016. A year ago, Fraser and Neave’s net-cash position was just S$205 million.

Lee Meng Tat, Fraser and Neave’s chief executive officer for its non-alcoholic beverages segment, commented that one company he is looking at is the Vietnam-listed Vietnam Dairy Products, which is also known as Vinamilk. Fraser and Neave currently owns an 11% stake in Vinamilk and is the second largest shareholder.

Fraser and Neave has also been working more closely with its main shareholders, TCC Group and Thai Beverage Public Company Limited  (SGX: Y92). The latter duo are both controlled by Thai billionaire Charoen Sirivadhanabhakdi. For instance, Fraser and Neave is now distributing products such as Chang Beer from Thai Beverage.

To me, the desire to expand its business looks like a good sign for the future for Fraser and Neave. Given that a large portion of its operating profit currently comes from its 55%-owned Malaysian subsidiary Fraser & Neave Holdings Bhd, Fraser and Neave is often seen as just a holding company.

Now with an agenda to diversify its business into other regions and the cash resources to do it, Fraser and Neave might just start to look more interesting to investors. The company is currently offering a dividend yield of 2.4% with a price to earnings ratio of just 5. But, it should be noted that the low PE ratio is a by-product of huge discontinued profits.

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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 doesn't own shares in any companies mentioned.