F & N - F&B powers on (DBSV)

BUY S$6.26

Price Target : S$ 7.20

At a Glance

• FY11 earnings of S$620.6m (ex exceptionals, revals) marks another record year

• F&B accounted for c.45% of PBIT on strong contribution from soft drinks and breweries

• S$2bn in unrecognized property sales to underpin profits over next couple of years

• Maintain Buy and TP of S$7.20

Comment on Results

Performance in line; final dividend of 12 Scts proposed (full year:18 Scts). FY11 attributable net profit rose by 6.2% to S$620.6m (EPS 44.1 Scts) on the back of a 10.1% increase in topline to S$6,274m. PBIT increased by a smaller 7.5% to S$1,152m, boosted by a strong showing from F&B (+14%) led by beer and soft drinks. This more than mitigated the slight dip in contribution from property and publishing & print divisions. NAV grew by 11.4% yoy to S$4.88. The group also proposed a final dividend of 12 Scts a share (FY11 DPS: 18 Scts).

F&B accounted for 45% of Group’s PBIT; key investments in breweries, to grow capacity and volumes. F&B continues to power ahead, and accounted for c.45% of the Group’s PBIT (FY10: 42%). The key performers were soft drinks (S$112.5m, +38%) and breweries (S$371.8m, +23%), which more than offset a weak performance from dairies (S$37.4m, -48%) due to higher input costs (whey powder and palm oil). Looking ahead, investments in breweries, new production lines in Vietnam and a new diary facility at Pulau Indah will lead volume growth.

S$2bn of pre-sold revenues not recognized to underpin performance in coming years. Property division’s PBIT declined due to lower contribution from Investment property, and completed development projects in China. The group launched 5 projects this year, with 2,060 (out of 2,757 units launched) snapped up and is looking to launch a further 2,088 units in 2012, a majority coming from its Punggol EC and Punggol Central mix-development site. As of Sept’11, FNN has c.S$2.0bn in unrecognized sales to be booked in the coming years.

Recommendation

Maintain Buy, TP unchanged at S$7.20. Valuation is undemanding at c.35% discount to our RNAV estimate of S$8.43. We continue to like its conglomerate structure, with its F&B and investment properties providing more defensive attributes compared to development properties. Our TP is maintained at S$7.20, based on a 15% discount to our RNAV.