Standard Chartered
TCC acquires 90% of F&N, with Thai Bev holding 29%: F&N
controls a portfolio of top soft-drink brands, including 100PLUS.
Thai Bev has its own range of soft drinks, such as the Oishi
brand of green tea.
We expect TCC to restructure holdings in Thai Bev, F&N:
We see 75% probability that TCC would inject F&N‟s food and
beverage (F&B) business into Thai Bev. We believe TCC is
likely to retain control of F&N principally as a property company.
Thai Bev could then acquire F&N‟s F&B business. The potential
deal could be funded by selling back the 29% stake in F&N
to TCC.
Strong rationale leads to our 75% restructuring probability:
Synergy benefits from a restructuring scenario would add 5% to
our FY15 PBIT forecast and reduce FY13E net gearing from
97% to 68%. Last month, S&P downgraded Thai Bev‟s credit
rating, due to the high leverage assumed from its F&N
investment. The scenario also provides the TCC group with two
focused listed entities in Singapore: Thai Bev as a consumer
company and F&N as a property company.
DCF valuation revisited:
We account for F&N‟s associate stake
using the equity method. The cost of capital is adjusted to
account for earnings exposure from F&N‟s principal markets.
This, along with our 75% probability of the integration of F&N‟s
soft drinks business and disposal of the F&N stake, enhances
our DCF-derived valuation for Thai Bev to SGD 0.75 (from SGD
0.49). Despite rising 79% in the past 12 months, Thai Bev is
8% cheaper than the regional beverage sector average. Its
discount to peer widens to 24% under our restructuring scenario.
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