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Here’s How Fraser & Neave Holdings Makes Its Money (Hint: Fraser and Neave Limited’s Investors May Want To Know Too)

Fraser & Neave Holdings Bhd (KLSE: 3689.KL) is a Malaysia-listed company. It also happens to be a very important subsidiary of the Singapore-listed Fraser and Neave Limited (SGX: F99).

Fraser & Neave Holdings has been a solid winner in Malaysia’s stock market over the last 10 years – in that period, the company has delivered a total return of 413%.

During the company’s financial year ended 30 September 2016 (FY2016), it reorganised its business operations “to be more market-centric and enhance customers’ ease of doing business with” it. The reorganisation resulted in it changing its business segments; now the company has three business segments, namely, Food and Beverages Malaysia, Food and Beverages Thailand, and Property & Others.

Given the change, I thought it would be useful to have a brief overview of how Fraser & Neave Holdings makes its money. The chart below shows a segmental breakdown of the company’s revenue and profit in FY2016:

fraser-neave-holdings-revenue-and-operating-profit-segment-chart
Source: Fraser & Neave Holdings annual report

You can see that the Property & Others segment is essentially inconsequential to Fraser & Neave Holdings’ revenue and profit, so I will only be focusing on the other two segments.

Food & Beverages Malaysia, as its name suggests, comprises Fraser & Neave Holdings’ Malaysia-based businesses. It includes the sale of soft drinks and dairy products, such as condensed milk and evaporated milk.

The segment’s soft drink brands include 100 Plus, F&N Seasons Teas, F&N Nutrisoy, and F&N Fun Flavour (all four aforementioned brands are the leaders in their respective product categories in Malaysia); meanwhile the dairy products come under brands such as Carnation.

Coming to the Food and Beverages Thailand segment, it focuses on the Thai market and its main products are condensed milk and evaporated milk that are also sold under the Carnation brand. Fraser & Neave Holdings is the leader in the canned milk market in Thailand with a market share of nearly 50%.

By understanding how Fraser & Neave Holdings earns its keep, investors can have a better appreciation for the risks and opportunities associated with the company.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.