Company Name: FRASER AND NEAVE, LIMITED
| Research House: Deutsche Bank | Price Call: BUY | Target Price: 9.42 |
If F&N’s hospitality assets are sold at the $1.4 billion offer price, Deutsche Bank estimates a 44 cent surplus to its $10.46/share sum-of-the-parts F&N valuation. It notes F&N recently raised its serviced apartments’ valuation by $125 million, taking total asset value to around $940 million; the house’s valuation is around $780 million.
It expects the difference between the offer price and asset value could reflect the management contracts’ value, which DB doesn’t include in its SOTP; it notes F&N currently owns around 1,620 rooms at 12 properties, with around 5,500 additional rooms under contract. DB notes management said at the latest EGM it was considering spinning off a hospitality REIT medium term, but it had no immediate plans, while TCC Assets’ offer document said it had no current plans to make material changes to existing businesses or redeploy fixed assets.
“With the mandatory general offer ongoing, corporate action is likely to slow down near term, suggesting that F&N’s share price could be range-bound at around ThaiBev’s MGO offer price (of $8.88) in the short term. We believe that 12-month valuations remain undemanding.” The house rates F&N Buy with $9.42 target. It is up 0.6% at $8.93.
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