Company Name: FRASER AND NEAVE, LIMITED
| Research House: Nomura | Price Call: BUY | Target Price: 9.86 |
Nomura said shares of Singapore’s Fraser and Neave, whose shareholders will vote on the sale of Asia Pacific Breweries to Heineken on Sept. 28, could rise above $8.50 after a proposed capital reduction.
F&N shares were up 0.2% at $8.27 on Friday. The stock has fallen about 2% since the Singapore drinks and property conglomerate announced its plan to cancel one for every three shares held by all shareholders and pay out $8.50 for each cancelled share.
“Assuming shareholders approve the sale of APB and the capital reduction, we see an arbitrage opportunity since F&N is offering to acquire one third of its issued shares at $8.50 per share,” Nomura said.
It added that after the capital reduction, F&N’s earnings per share, dividend per share and revised net asset value will be enhanced, which should re-rate the share price above $8.50. Nomura has a ’buy’ rating and a $9.86 target price on the stock.
But Nomura said one possible risk is that shareholders may reject the proposed sale of F&N’s nearly 40% stake in APB.
With 80% of F&N’s earnings expected to come from property after the capital reduction, investor interest in F&N may wane unless the management can increase the contribution from non-property activities over time, Nomura added.
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