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F & N / ASIA PACIFIC BREW
S$7.60-FRNM.SI / S$42.00-APBS.SI
Heineken, which owns an effective 42% of APB, has
offered $50 a share for F&N’s effective 40% stake
(valuing it at $5.1 bln or a whopping $3.60 per
F&N share), to be accepted within 4 days time,
July 27. (Asia Pacific Investments, co-owned
by Heineken and F&N and formed more than 80 years
ago, owns 64.82% of APB, while Heineken and F&N
each owns a direct 7.3% and 9.5% respectively.)
If accepted, Heineken will launch a mandatory offer
for the remaining shares. At $50, ASPB’s market cap
would be $12.91 bln.
Aberdeen Asset, with a 1% stake in F&N, thinks
$50 is a good price for APB (ie F&N should accept).
Indeed, Financial Times noted that at this price, APB
would be valued at a rich 19x EV-Ebitda, vs 11x
for Heineken.
Fact is, Kindest Place (owned by son-in-law of
Charoen Sirivadhanabhakdi, founder of SGXlisted
Thai Beverage) has a deal to buy OCBC’s and
Great Eastern’s combined 7.9% stake in APB at $45
a share. Also, Thai Bev has a deal to buy from OCBC /
GE and Lee Rubber, a collective 22% stake in F&N at
$8.88 a share, to be completed within 90 days, and
which is subject to approval of Thai Bev’s shareholders
at an EGM.
While the situation is “fluid”, we would not rule out
F&N rejecting Heineken’s attractive offer. Nor Khun
Charoen rejecting Thai Bev’s offer to buy F&N shares
from OCBC / GE at Thai Bev’s EGM (ie risk to OCBC /
GE’s share price). F&N then becomes largely a property
company with loads of cash, and interests in soft drinks,
dairies and other foods, which is unlikely of interest to
Charoen or for that matter Kirin Holdings with 14.9%
of F&N.
In view of the above, HOLD may be more appropriate
for now, although any surge in F&N’s share price on
the back of expectation of a big payout, may also be a
selling opportunity.
Daily Review, 23 July 2012 Page 2 of 6
SGX-ST Member, SGX-DT (CNCM)
DBS
S$14.68-DBSM.SI
The stock is now 3.5% above $14.18 the day before
the proposed acquisition of Bank Danamon from
Temasek was announced almost 4 months ago, and
which had sent the stock plunging to a low of $ by .
Interesting that DBS’ share price should have risen in
reaction to news that the Indonesian authorities could
give the green light to the transaction, despite generally
unenthusiastic comments by analysts (as if DBS’
management would would do nothing about
Danamon’s high dependence on auto-related
loans). DBS was at $14.18 a week ago.
We believe the key reason for the higher price could
well be the fact that a significantly higher market cap
for DBS post-acquisition would mean indexed funds
having to increase their holdings in the Bank. (The 439
mln new shares to be issued to Temasek is valued at
$6176.7 mln, 17% of DBS’ current market cap of
$35,741.5 mln.)
Recall there was no such an impact from the all-cash
acquisition of Dao Heng more than 10 years ago.
The chart below shows the next big hurdle for DBS is
the thrice-tested $15.50 level, first in Jan’2010.
We will use this as our near-to-medium target.
Maintain BUY.
Daily Review, 23 July 2012 Page 3 of 6
SGX-ST Member, SGX-DT (CNCM)
i. We do not recommend subscribing for the
ASCENDAS HOSPITALITY’s IPO (88 cents). The
projected 8% average yield for 2 years is not attractive
when CDL Hospitality is offering 5.6% (reflecting
its strength in recent weeks thanks to Ascendas H).
The former’s hotel portfolio is largely in Australia (7
held by a fund), China (3) and Japan (1), while CDLHT’s
is largely in Singapore, and largely with minimum
guaranteed rents at that, which Ascendas H does
not.
ii. Dr Benety Chang has quit as CEO of PPL
Shipyard, 85% owned by SEMB MARINE ($4.91,
down 5) and 15% by the consortium that acquired it
OTHER BRIEFS
from Baker Tech / PPL Holdings. BT quoted KK
Tan, SMM’s former CEO, as warning of PPL Shipyard
“collapsing” without Dr Chang.
iii. It must be a relief SGX ($6.75, up 7) has refuted
London’s Daily Telegraph report on a merger between
SGX and London Stock Exchange, valuing the latter
at 13.5 pounds, a whopping 35% premium to LSE’s
Thursday price.
iv. Spain’s problems (10-year bond yield above 7% etc)
has again caused sell-off across Europe (German, UK
stocks down more than 1%) and to a lesser extent
US (Dow off 0.9%).1.
Daily Review, 23 July 2012 Page 4 of 6
SGX-ST Member, SGX-DT (CNCM)
The key point from our meeting with Cheung Woh’s
Chairman & CEO is that the outlook for the hard disk
drive industry over the next 6 months is difficult.
The key reason is that major hard disk drive customers
indicate down-side risks on the back of 2.5 inch drives
losing significant market share to tablet computers
while the Euro-zone debt crisis brings lower than
expected shipments of traditional PCs even in the
traditionally strong Chinese and Indian markets.
Cheung Woh will target to breakeven by focusing on
cost controls and improve productivity in the near
term and will ramp up sales of higher-end drives that
cater to the cloud computing market next year.
CHEUNG WOH TECH
S$0.18-CWTE.SI
We downgraded our call on hard disk drive related
stocks such as Armstrong, Broadway and Cheung
Woh on 6 July’12 after Seagate’s profit warning and
the sector has fallen between 7-11% on average since.
Aegis Private Capital reduced their stake in
Broadway on 13 July ’12 from 6.01% to 5.94% and on
19 July ’12 further reduced it to 4.97% (below the 5%
disclosure level). Broadway’s share price weakness
in the last week is likely attributable to both Seagate’s
profit warning as well as Aegis Private Capital’s selling.
Given the sector’s weak near term outlook, we would
advise caution against bottom-fishing and would
continue to stay away for the time being.
Daily Review, 23 July 2012 Page 5 of 6
SGX-ST Member, SGX-DT (CNCM)
Bloomberg reported that a Chinese Central Bank
adviser Song Guoqing warned that 3Q ’12 GDP
growth in China could surprise the market on the
CHINA
down-side by coming in at 7.4%, down from 2Q’12’s
7.6% level. (Consensus is currently expecting 3Q ’12
GDP growth to come in around 8%)
Daily Review, 23 July 2012 Page 6 of 6
SGX-ST Member, SGX-DT (CNCM)
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