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Thai Beverage to use F&N to grow non-Thai business: CIMB report

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Mainboard-listed Thai Beverage Public Company (ThaiBev) is set to use Singapore-based Fraser & Neave (F&N) to expand its business outside of Thailand, according to a CIMB report.

It said that a key takeaway from a recent meeting with F&N management was the confirmation that ThaiBev will use F&N to grow its non-Thai business.

ThaiBev had earlier announced its plans to complete the corporate restructuring of both F&N and Frasers Centrepoint, in which it holds a combined 28 per cent stake, by September this year.


"We retain our view that most likely, ThaiBev will first divest Frasers Centrepoint and use the proceeds to enlarge its stake in F&N," said CIMB analyst Jonathan Seow in the report.

On F&N, Mr Seow said that he likes its regional expansion story, and expects the firm to be among the bidders for Sabeco, and to also gradually increase its Vinamilk stake, now at 18.74 per cent.

Sabeco is the top beer producer in Vietnam, while Vinamilk is the country's largest dairy company.

Mr Seow noted that F&N, which has declared its intentions to increase its stake in Vinamilk, is unlikely to overpay for Vinamilk shares in the open market.

"The ideal scenario would be to buy a bigger stake from SCIC (the state government which still holds a 36 per cent stake).

"The timing of such a share sale remains unknown," he said.

F&N has also expressed its ambitions and interest in Vietnamese beer assets, primarily Sabeco, although the management shared nothing on the potential valuation multiples it is willing to pay.

"F&N's latest net gearing stands at three per cent, and it is comfortable to raise this further should there be merger and acquisition opportunities.

Between Sabeco and Vinamilk, we understand F&N can comfortably acquire either one of the assets, but would likely have to tap equity markets if both targets were to become available at the same time," said Mr Seow.

"We read F&N's plans to acquire assets in Vietnam as confirming our base case assumption that Thaibev will use F&N to acquire assets outside of Thailand."

CIMB reiterated its "add" call on Thai Beverage stock, with an unchanged target price of $1.07. - THE STRAITS TIMES