First step but not there yet
F&N has announced that it plans to demerge its property business through a dividend in specie distribution. This paves the way for Thai Bev to sell its 28.6% stake in this business. The question now is what TCC plans to do with its 61.7% stake in F&N.
Presumably, Thai Bev will swap its 28.6% stake in the property business for TCC’s 61.7% stake in F&N. We update our SOP to account for F&N’s split entities. Our SOP-based target price falls because of a 15% discount applied to the property RNAV. Our FY13-15 estimates are also tweaked down due to housekeeping matters. Maintain Outperform with catalysts to come from a further restructuring.
F&N has announced that it plans to demerge the property business through a distribution in specie. For every one share of F&N owned, an investor will get two shares of Frasers Centrepoint Limited (FCL). This is subject to shareholder approval at an EGM that will take place in late October or early November this year. This is a formality as TCC Assets (61.7% stake) has notified the company of its intention to vote in favour of this transaction. Post distribution in specie, F&N and FCL will be independently listed entities. F&N plans to list FCL on the SGX at end-Nov or early-Dec.
What We Think
We believe it is likely that Thai Bev will sell its 28.6% FCL stake, presumably to TCC. F&N’s decision to list FCL will facilitate this process because there will now be a market price. This will make it easier to justify to minorities that the transaction is at fair value. What is more important is that TCC has yet to communicate its plans for its 61.7% stake in F&N. We think that the likely end game is for TCC to swap its stake in F&N (estimated to be worth S$2bn) for Thai Bev’s stake in FCL (estimated worth of S$1.9bn). Thai Bev would then become the majority shareholder of F&N, paving the way for it to extract synergies.
F&N also communicated briefly its plans for the F&B business in the announcement. Besides focusing on penetrating ASEAN countries, it intends to build alliances with international brands keen on this region.
What You Should Do
We keep our Outperform call. Catalysts to come from a further restructuring.
Publish date: 28/08/13