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Regional Equity Strategy Q4 2007
Stock Profile: F & N
BUY S$5.25 STI : 3,476.31
Price Target : 12-Month S$ 6.30
Potential Catalyst: Increases in development property
projects and launches, securitisation of investment properties
and M&As from its F&B business
ANALYST
Andy Sim CFA +65 6398 7969
andysim@dbsvickers.com
FORECASTS AND VALUATION
FY Sep (S$ m) 2006A 2007F 2008F 2009F
Turnover 3,795.6 4,277.9 4,768.6 5,417.3
EBITDA 728.9 856.5 1,019.5 1,172.2
Pre-tax Profit 577.2 674.5 844.6 979.5
Net Profit 319.5 365.4 457.5 530.6
Net Pft (Pre Ex.) 285.5 365.4 457.5 530.6
EPS (S cts) 27.1 27.5 33.2 38.5
EPS Pre Ex. (S cts) 24.2 27.5 33.2 38.5
EPS Gth Pre Ex (%) 7 13 21 16
Diluted EPS (S cts) 27.1 27.5 33.2 38.5
Net DPS (S cts) 11.9 11.7 14.6 16.9
BV Per Share (S cts) 305.4 342.6 364.1 388.0
PE (X) 19.4 19.1 15.8 13.6
PE Pre Ex. (X) 21.7 19.1 15.8 13.6
P/Cash Flow (X) 14.9 15.5 13.0 11.2
EV/EBITDA (X) 13.5 11.9 10.4 9.2
Net Div Yield (%) 2.3 2.2 2.8 3.2
P/BV (X) 1.7 1.5 1.4 1.4
Net Debt/Equity (X) 0.6 0.3 0.3 0.3
ROAE (%) 9.5 8.8 9.4 10.2
SHARE PRICE CHART
S$
7.10
6.60
6.10
5.60
5.10
4.60
4.10
3.60
Sep-06 Nov-06 Feb-07 Apr-07 Jul-07 Sep-07
F & N
100-Day M A
AT A GLANCE
Issued Capital (m shrs) 1,383
Mkt. Cap (S$m/US$m) 7,260 / 4,787
Major Shareholders
Seletar Investment (%) 14.9
Great Eastern Limited (%) 5.8
Free Float (%) 79.3
Avg. Daily Vol.(‘000) 2,433
Earnings Rev (%): 2007: - 2008: -
Consensus EPS (S cts): 2007: 26.7 2008: 30.7
Variance vs Cons (%): 2007: 3.0 2008: 8.1
Sector : Industrials
Bloomberg/Reuters Code: FNN SP/FRNM.SI
Principal Business: F&N is in F&B, property and printing and
publishing business.
F & N
Going strongly into its 125 th year
Story: To-date, sales of F&N’s recent launches has been
robust. Its most recent launch, Soleil @ Sinaran, is 95% sold at
ASP of S$1,450 psf. As the Group progressively recognises
contributions from projects sold over the last 12 months, we
should witness good profit growth in the next 1 – 2 years.
Point: The Group has a residential landbank of around 5m sq
ft in Singapore; and we expect these launches, largely targeted at
the mid-tier segments, to continue to meet with keen interest as
they are progressively released over the next one to two years. We
also expect its industrial/office REIT to be launched probably end
07/ early 08. We estimate the initial three properties (Alexandra
Technopark, Alexandra Pt and Valley Point) could return about
S$400m cash assuming it retains a 50% interest in the REIT. The
strong cash flow and profit contribution from its property
divisions, affords if an opportunity to grow its F&B business. While
we have not heard of any specific acquisitions on this front to
date, we believe the Group is actively pursuing opportunities.
Separately, the Group has appointed Mr Lee Hsien Yang, ex-
Singtel chief executive, to be its non-executive Chairman with
effect from 15 Oct 07.
Relevance: Maintain BUY, TP: S$6.30 based on sum-of-theparts
valuation, with a 10% premium on its property RNAV
(potential upside from Singapore and regional landbanks).
Recent sold-out launches should provide good profit growth. With
the various sold-out launches over the last 12 months and better than
expected prices achieved for Soleil and St Thomas Suites, we expect to
see good bottomline growth in the next 1-2 years. To-date, Soleil @
Sinaran is 95% sold achieving ASP of S$1,450 psf. The price was higher
than our previous estimate of S$1,200 – S$1,300 psf. Next, we expect to
see launches of projects at Kim Yam (Far East Mansion), Siglap (Flamingo
Valley), Bedok Reservoir (Waterfront View), Tampines St 11 (Tampines
Court) and Woodsville.
Upcoming office and industrial REIT. We expect its office and
industrial REIT to be launched sometime late 07/early 08. Assuming the
initial three properties are valued at around S$800m and F&N retains
50% interest in the REIT, the exercise could return around S$400m cash
to its balance sheet based on our calculation. This could be used for
further acquisitions to inject into this REIT or to pay down its debt.
Ex-Singtel chief to be new Chairman. Mr Lee brings along his
experience and track record during his time as Chief Executive of
Singtel from 1995 to 2007. Dr Michael Fam has been instrumental in
transforming the Group since assuming chairmanship in 1982. He has
indicated his retirement previously and had transferred his CEO role
to Dr Han Cheng Fong. Dr Fam would remain as an advisor to
facilitate the handover.
Refer to important disclosures at the end of this report
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