MBL valuation does little to help
- F&N announced it has received the independent valuation report of Myanmar Brewery (MBL), assessing the fair value of their 55%-stake at US$560m.
- Although this is more than double the original offer of US$246m, we still deem it far below what MBL would be worth in the open market.
- A sale of its crown jewel at this price would be negative for valuations of F&N.
- Our SOP-based target price remains at S$2.58, but has downside risks.
- Maintain Reduce.
What Happened
- F&N issued a statement last night that said an independent valuer assessed its 55% stake in Myanmar Brewery (MBL) as being worth US$560m (S$763m).
What We Think
- Our current target price for F&N (25x FY16 P/E, peer valuation) values its stake in MBL at S$1,548m so while the independent valuation is more than double the original low-ball valuation offered by MEHL, it is still only valuing the beer business at about 12.3x FY15 P/E, i.e. very cheap.
- F&N got a better deal but it certainly did not get a good deal.
- Clearly, the earnings taken for the valuations were the beer earnings some years ago, when beer had not done as well yet.
- We estimate that the price tag values MBL at 12.3x FY15 P/E.
What You Should Do
- F&N’s share price has de-rated in the past few months as the overhang of a sale of their crown jewel, at marked-down price, was a real risk.
- We maintain our Reduce rating on F&N, pending the actual sale of MBL at the independent valuer’s price.
- Assuming F&N eventually sells out its stake in MBL for S$763m, our sum-of-parts target price would fall to S$2.04.
(Kenneth NG, CFA; Jonathan SEOW)
Source: http://research.itradecimb.com/
