F&N Gets Boost From Buy Calls

Source　：The Business Times, April 14, 2008

SHARES of Fraser & Neave have received a boost after two 'buy' recommendations from Kim Eng Research and DBS Vickers.

Its shares surged 18 cents or 3.8 per cent on Friday to close at $4.87.

Kim Eng initiated coverage of F&N with a $6 target price in a report on Thursday, saying: 'The market is not fully recognising the value of F&N's property division.'

The 'buy' call aside, Kim Eng had much to say about how F&N could improve its operations. Its report suggested that the conglomerate do more to reconnect with its food and beverage brands, because it is 'not fully enhancing shareholder value by continuing to focus so heavily on property'.

The report also noted that with former SingTel CEO Lee Hsien Yang's having come on board as F&N's chairman, and with Temasek Holdings' involvement as a substantial shareholder, 'there will never be a better time than now to shake things up by more than a bit'.

Kim Eng proposed two strategies for F&N. One is to sell its property assets to a player 'who knows the real value of its property assets and capabilities'. Possible buyers are said by Kim Eng to be CapitaLand, which shares the same asset profile and strategy with F&N, and Far East Organization, Singapore's largest private residential developer.

When contacted, a CapitaLand spokesperson said: 'CapitaLand is not considering buying F&N's property arm.' Far East Organization was unable to provide a response.

According to Kim Eng, the other strategy is for F&N to break up and list each of its units separately, The report said: 'It is not clear which business the market is giving a premium to and which is being discounted.'

The second shot in the arm for F&N's shares came from DBS Vickers, which set a target price of $5.85. Among other things, its Thursday report said F&N's management is confident of preserving strong margins for property development and expects to maintain profit-growth plans for the food and beverage business.

Despite the rise in F&N's share price on Friday, when 1.4 million shares changed hands, the stock is still some distance away from its $5.80 high since the start of the year.