Published March 10, 2009

F&N and YHS: alike and yet so different

By EMILYN YAP

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ARE Fraser and Neave (F&N) and Yeo Hiap Seng (YHS) 'same same but different'? Pardon the colloquialism but this bit of slang from Thailand could just be the most apt when it comes to describing how the two groups compare.

Cool profit: The relatively recession-resilient F&B segment still brought in the cash for F&N

Mention F&N and YHS and the man-in-the-street would think they are alike. Both are household names and are diversified across the property and food and beverage (F&B) sectors. Surprisingly though, their businesses have yielded rather different financial results.

Take the property business for instance. As most would have expected, revenue from F&N's property division fell in the latest financial quarter (by 22 per cent from a year ago) as activity in the real estate market waned. Profits were also trimmed by allowances for foreseeable losses on development projects. Nonetheless, the division managed to stay profitable.

YHS, however, seems to be having a harder time reaping from properties. In the last quarter alone, the division's revenue plunged 92 per cent and it posted an after-tax loss of $6.02 million, partly due to lower sales and also an allowance for foreseeable losses on development projects. The loss shrank year-on-year but investors are still seeing red.

With the property business contracting, the F&B segment has naturally grown as a revenue contributor for both F&N and YHS.

But this relatively recession-resilient business has also not brought profits for the latter.

In the last quarter, YHS's F&B division posted an after tax-loss of $8.31 million despite achieving higher revenue and gross profit. The loss widened from a year ago because of financial asset impairments; property, plant and equipment impairments and higher advertising, promotion and tax expenses. The group also took a larger share of loss in a Chinese associated company.

On the other hand, F&B still brought in the cash for F&N though the segment's attributable profit did drop marginally because of weaker dairy product sales.

The contrast between the two groups was clearest in the last quarter's bottom lines. While F&N's overall net profit was $88.98 million after falling 18 per cent year-on-year, YHS chalked up a larger net loss of $16.70 million.

To be fair, F&N is a much bigger entity and its investments and products are not entirely the same as YHS's - F&N probably has much more cushion against adverse business conditions. Still, for companies which are significantly involved in the same industries, their results are far off.

It's also a reminder to investors that how they respond to a takeover offer could still have consequences many years down the road. Consider that both F&N and YHS were almost on par more than 10 years ago as Straits Times Index stocks and popular F&B plays. Today, however, YHS is no longer on the index and there have been no trades in the counter for close to three months. Investors who did not sell their holdings when it became part of a takeover tussle in the 1990s would have few chances to let go at good prices now and are well and truly stuck.

'Same same but different'? Certainly. First-time visitors to Thailand, let F&N and YHS show you what the phrase means.