For its FNN Berhad and Vinamilk stakes, the analysts believe the current market price and analysts’ average target prices could be reasonable proxies for valuation purposes, subject to a holdco discount of 10%.
“We value Times Publishing at about 0.8x EV to revenue, in line with the lower end of listed peers and 1x net asset value (NAV). Lastly, we value F&N standalone at 14x to 18x EV/EBITDA, in line with peers and precedent transactions, especially given its high growth rate,” say the analysts, adding that overall, this translates to a fair value per share of $1.79 to $2.06.
The analysts view that F&N is a stable business with solid growth prospects. The group operates in the relatively resilient beverage and dairy segments. These categories offer strong growth potential, supported by rising consumption trends in fast-developing markets such as Malaysia, Vietnam and Myanmar.
The DBS analysts see favourable consumption tailwinds, especially in the dairy category, where it is a key emerging trend in Asian economies like Malaysia, Vietnam and Thailand, where the group has dairy operations. While Singapore has a 7L per capita consumption, the three countries range from just 0.5L to 1.7L per capital, indicating substantial room for growth.
F&N currently imports milk for downstream production. With its new integrated farming operations in Malaysia, the group is aiming to be self-sufficient in fresh milk supply. It aims to breakeven by 2028.
“We believe the capacity can be absorbed by regional markets with an estimated 400 million litres of demand, should key emerging ASEAN regions hit 3.5L per capita consumption (half of Singapore),” according to the analysts.
The way Chee and Sim see it, the stock’s undervaluation likely stemmed from illiquidity, with fair EV estimated at $3.4 billion to $3.8 billion. F&N has a low free float of 12.2% with last six months average daily traded value below $100,000, which likely excludes many institutional investors.
