Aug 30, 2013

Fraser and Neave Myanmar Brewery Dispute and the Business of the Golden Liquid


Fraser and Neave's joint venture partner in Myanmar Brewery Limited (MBL) has expressed an intention to stake a claim on F&N's shares in MBL. The partner, Myanma Economic Holdings Limited (MEHL) is run by the ruling military has begun a move to force the sale of F&N's ownership stake of 55% in MBL. While the price has yet to be determined, it may come as no surprise if the stake is sold at an unfair price.

While F&N has engaged lawyers to resist the claim and assess the financial impact of the dispute, I am very pessimistic on the effectiveness of lawyers in such a David and Goliath scenario.

It is very sad that such an ugly event has appeared at this juncture. It is a good warning to all who are still blinded by potential prosperity and riches that Myanmar is still a long way off from building an adequate legal structure to protect shareholders and businesses. I believe as of today the military still speaks the loudest in any issue of arbitration.



Points to note from my analysis

1. Fraser and Neave
In the short term, the loss of MBL will have a limited impact on F&N as it is still a small portion of their business. Yet, it has the most potential and is the fastest growing subsidiary and in the fastest growing market for F&N. In the long term, F&N will be left out cold from a possibly valuable business.

2. Thai Bev
Our favorite elephant beer, has earlier in the year, won approval to produce Chang Beer in Myanmar. Thai Bev owns 51% in its Myanmar operations and will be able to brew Chang beer in Yangon, Mandalay and Shan State.
Beer is a good prospect in Myanmar, with good domestic demand, coupled with tight regulations that prevent the import of beer. Which is no surprise why the Myanmar government is so interested to have its hand in the lucrative pie. An application by San Miguel of the Philippines had been rejected.

I have low expectations of international wrangling by Singaporean companies who seem easily out-muscled when swimming in the sea. I believe the Thai's are better at handling such tricky manoeuvres.

Restrictive policies on the import of beer and alcohol in Myanmar has fueled the black market trade. For fiscal year 2013, up to 10 million cans of Chang Beer will have been imported into Myanmar via the black market. Chang Beer is the top brand with more than 50% market share and such imports are expected to rise 20% a year.

Aug 28, 2013

Thai alcohol tax ceiling rises to the sky, politicians squeezing more out of my bottle of Chang


It is unbelievable how many problems this Kingdom faces on a daily basis from policies and politicians who tend to shoot their own feet. The latest story today comes from the Finance Minister and his merry friends.

On Tuesday, Finance Minister Kittiratt proposed a sharp increase in alcohol excise tax, and on Tuesday(same day?) the proposal was approved by the cabinet.

New excise tax ceiling
Maximum rate of 2000 baht per litre of 100% alcohol content for both fermented beverages(beer, wine), and distilled beverages(whiskey, brandy).

Current tax
Fermented Beverages - Maximum rate of 100 baht per litre of 100% alcohol content or 60% of product value, whichever higher.
Distilled Beverages - Maximum rate of 400 baht per litre of 100% alcohol content or 50% of value, whichever higher.

Excise tax calculation for alcoholic beverages to change
Taxes for domestically-brewed alcohol beverages are taxed based on ex-factory prices currently, while imported beverages are taxed based on Cost, Insurance, and Freight prices.

The new change will calculate based upon retail or wholesale prices, which will result in much higher tax revenue.

Charity Fund from excise taxes
1.5-2% of the total alcohol excise tax will go into this new fund to support the disabled, education and finance activities of the Excise Department. An estimation of the fund size will be about one billion baht.


Implications?
To be fair, the exact tax rates that will be imposed on alcoholic beverages are still yet to be finalized even though the new ceiling has been raised. However the expectations of the policy makers are still that tax collections from alcoholic beverages will rise sharply, so the final effect will still result in more expensive drinks in Thailand going forward.

I don't think the final price of a drink will rise very much as a result of this, although it remains to be seen whether it will cause the merry Farangs to think twice before knocking back a Chang or two.

Additionally, I personally believe that the high excise taxes and regulations on alcohol in Thailand are geared towards protecting its domestic big boys; Boon Rawd and Thai Bev, as potential market entrants and craft breweries are stifled and put off by the taxes and minimum capital investments.

Currently, excise taxes take up 50-60% cost on revenues for both Spirits and Beer for Thai Bev. Just last year on Aug 22, excise taxes of white spirits, compounded spirits and brandy rose which Thai Bev passed the cost directly to consumers.

Thai Bev's weak 1H results were the result of weaker domestic and international demand, also the drop in volume was due to the large purchases by distributors previously, before the last excise tax increase. Without any other major destabilizing events, distributors and vendors are likely to repeat the same this time round, to stock up on inventory before the new draconian excise taxes come into effect. This should boost sales for Thai Bev in the short term.


Aug 27, 2013

F&N Property arm to list end of the year

F&N plans to separate its property business by listing it at the end of the year. Existing F&N shareholders will be offered two shares of Frasers Centrepoint for every F&N share held.

DMG believes the effects of the holding company discount upon F&N due to the property and non-property businesses being lumped together previously, will be mitigated as the individual businesses can be valued independently. They also singled out the F&B business to see an improved valuation.

I am very interested to see how this pans out and what value the F&B business will be and its resultant effect on Thai Bev.

Aug 26, 2013

F&N Reit to raise at least S$640 Million

Yet another update on the proposed REIT today, from Reuters.
http://www.reuters.com/article/2013/08/26/us-fraserandneave-ipo-reit-idUSBRE97P01N20130826

Still not much new information;
1. IPO expected to raise at least S$640 million
2. Occur in first half of 2014

Simple look at the other hospitality trusts...
1. Ascendas H-Trust; Market cap about S$770 million. Offer price S$0.88, closed at S$0.745 today.

2. Far East H-Trust; Market cap about S$1.5 billion. Offer price S$0.93, closed at S$0.855 today.

3. OUE H-Trust; Market cap about S$1.13 billion. Offer price S$0.88, closed at S$0.865 today.

Related post;
http://cluelesspunter.blogspot.sg/2013/08/investments-in-asian-hotels-strongest.html
http://cluelesspunter.blogspot.sg/2013/08/f-asset-restructuring-laying-of.html



Aug 23, 2013

Thai Bev - Lower debt, focus on business now


Capital reduction exercise proceeds totalling S$1.353 billion from F&N had been received by Thai Bev on July 31.

Thai Bev has utilised the funds to repay its long term debt of S$1 billion and short term debt of S$353 million. This move is according to plan and has allowed the firm to reduce its leverage significantly.

Moody's view this move as credit positive especially in light of the weak first half earnings performance this year. The pro forma adjusted Debt / EBITDA has improved from 4.2x on 30 June 2013, to 2.8x; the appropriate level for a Baa3 credit rating.

Going forward, I expect sales volumes for beer and soft drinks will slowly pick up in the second half, especially for soft drinks. The sharp decline in sales volumes of soft drinks was attributed to the termination of bottling contract with PepsiCo, however Serm Suk has successfully gained a sizeable market share at the expense of Pepsi, which is why I believe the second half will be better. Spirits business unit will still generate stable operating cash flows due to its market leadership but it is also dependent on international sales.

The recent ASEAN Economic Ministers' Meeting in Brunei saw some progress towards the AEC 2015 whereby the member states agreed to encourage each country to cut at least one non-tariff barrier a year. This is of course, merely words out of the sky until we actually see the actual actions. Malaysia and Indonesia were also urged to reduce their high duties on alcoholic beverages by 2015. If it really materializes, there will be new markets to penetrate, however I believe the high duties will still stay due to political pressure.

With the monumental task of working out business synergy with the beverages from F&N, and the upcoming restructuring of its properties, I believe Thai Bev has much on its plate now, therefore there should not be any more acquisitions occurring within the next year or so, and Debt / EBITDA should remain below 3x.

Aug 22, 2013

CACHE - Insider trades, 21 Aug 13

John Lim is a Non-Executive Director. He is also the Group CEO and Executive Director of ARA.

Aug 20, 2013

ASEAN Economic Community 2015, castle in the air?



Today I read an article from the Bangkok Post that reported that a survey conducted jointly by the American Chamber of Commerce in Singapore and the US Chamber of Commerce identified that US firms operating in ASEAN countries are skeptical that the 2015 deadline can be met to establish a single market.

475 senior US business executives from ASEAN were polled, and 52% believe the AEC's goals will not be realised by 2015. Of this 52%, almost 60% believe it will be delayed until 2020 or even later. Those that believed the 2015 goal will be achieved made up 23%.

US firms still expect their level of trade and investment in ASEAN to rise over the next five years, with Indonesia identified as the most attractive country for new business expansion, followed by Vietnam, Thailand and Myanmar.

The 10-member ASEAN which comprises of about 600 million people, aim to establish by 2015 a single market and production base for its members, by enabling free flow of goods, services, investment, capital and skilled labour.

The big picture of the proposed plan remains clouded by haze. The deadline is also set on Dec 31 2015, which really should let the plan be renamed AEC 2016.


It seems to me Thailand is the only member really enthusiastic about preparing for the AEC, as it prepared an 8-point strategic plan in the later half of 2012. They have also been bombarding their citizens with the AEC since around 2010.

The Philippines have only begun worrying about the AEC, as two senators are now seeking a Senate inquiry to determine the potential ''risks and opportunities'' for Filipino workers and industries as a result of the AEC 2015. The country is geographically separated from other ASEAN countries, which is a disadvantage.

The other members; who mainly trade with countries outside ASEAN such as US, Europe, Japan, are similarly starting to worry only now about the after effects of opening their economic borders to their neighbours, fearing that their domestic businesses may not be able to compete. It is only now that they realise the need to prepare their small and medium enterprises (SME's), train their labour force, review existing policies, etc. There is also a lack of unity at the member-level, which is a major stumbling block to the cooperation and coordination needed to create the AEC.

''ASEAN professionals in the following areas can work in other ASEAN countries, if they meet local qualifications, pass licensing tests in that country's local language and meet work permit requirements.
They are as follows; doctors, dentists, nurses, engineers, architects, accountants, and surveyors.''

When the borders finally do come down, I believe it will be the end for our local engineers! Labor-surplus countries will flood the developed members with labor, and I think it will truly be sad to be a member of the working-class then. (There are barriers such as qualifications, licensing tests yes, but anyone is naive to believe it will filter or control the impending labour tsunami.)

The single economic bloc will definitely result in inequality, with some members prospering more than others. Although there was a mention of suitable ''compensation'' to the losers, I am skeptical that they will be able to reach the ones who have fallen through the net.

Aside to that, the under-developed or developing members will become more attractive for foreign investment as low-cost manufacturing and production facilities relocate, while the big boys of the region, such as PTT, Astra or Singtel will benefit. Most large corporations with the means, have already or begun establishing operations in Southeast Asia as they start to organize their business structure.

Recent notable M&A activity within the region include the APB sale to Heineken, some of RBS' assets to CIMB, F&N to TCC. The Japanese have been very active too, with the deals for Bank of Ayudhya and PT Bank Tabungan. A new upcoming deal from Mizuho may involve TMB bank from Thailand.

An update for today, Thailand is in a technical recession, Indonesia has a current account deficit not seen since 1996,and also nothing optimistic on the horizon for the other smaller members. 

Aug 16, 2013

Thaibev 1H13 results, a sober look at the business


Here are some snapshots of the 1H13 results;

A. Dividend
For Interim 2013, Thai Bev has just went CD and announced dividend per share of 0.14 baht, unchanged from 2012. Earnings per share is 0.33 baht, down from 0.37 baht in 2012. Dividend Payout ratio has increased from 38% in 2012 to 42% to maintain the same amount of dividend.

B. Financial Highlights & Business Segment Review
Sales Revenue, 1H13: -7.3% from 1H12.
Net Profit (ex. F&N), 1H13: -13.5% from 1H12.

Margin (include F&N);
EBITDA, 1H13: 17.7% from 17.8% 1H12.
Net Profit Margin, 1H13: 11.0% from 11.7% 1H12.
notes:
-1H12 does not have contributions from F&N.
-Finance costs of 806 mil baht will be reduced once Thai Bev receives cash from F&N capital reduction.
-In 1H13, F&N boosted EBITDA margin from 15.8% to 17.7%, and Net Profit Margin from 10.1% to 11.0%.
If we ignore looking for early signs of business synergy, the acquisition of F&N was able to bolster Thai Bev's weak Q2 results. It is unavoidable for the spirits and alcoholic beverages to hit a bump the past 1H, and the introduction of other beverages to broaden its product portfolio still makes sense.

As usual, the devil is in the details...

Spirits are still the main source of profits and 2/3 of sales, and the other business segments have yet to show any positive contribution, with the exception of food. Food segment once again turns in marginal profits, maintaining its performance from the first quarter. Beer and Non-alcoholic beverages take up about 1/3 of sales but are loss making and costly businesses which Thai Bev has repeatedly pumped money into advertising and promotion to try to gain market share. Oishi needs to scale up to be able to meaningfully take some load off Spirits.

Spirits
Looking past short term comparisons, 1H13 has still managed to grow Sales Revenue over 1H12 at +1.2%, which is reasonable considering the nature of business. EBITDA and Net Profit Margins have slipped to 25.0% and 18.3%, from 26.9% and 19.4% respectively.
Raw material costs take up only 6.0% of total revenue, thus I am sure the only risks it faces are excise taxes and sales challenges.
The decrease in earnings was due to a falling gross profits and increased idle and staff costs, despite a decrease in corporate income tax at 20% from 23% in 2012 previously.

Beer
Sales Revenue contracted -2.5% while the company has managed to reduce cost of goods sold to 86.1% of revenue frm 87.7% in 1H12.
EBITDA margin was unchanged at 0.7% of revenue while the segment recorded a Net Loss margin of -1.5% of revenue.
Decrease in earnings was due to increased advertising, promotion and staff costs and decrease in depreciation.
Among costs to revenue, Packaging cost stood out like a sore thumb with 14.3% in 1H13. This appears to be an area which Thai Bev can start from to drive efficiency and cost savings.
Positive sign that gross profit has increased in 1H13, however as Thai Bev has previously outlined its commitment to continue an advertising and promotion blitz in 2014, I expect EBITDA to be suppressed again for this year.

Excise taxes on Thai Bev's alcoholic beverages;
-White spirits: 120 baht to 150 baht
- Compounded spirits: 300 baht to 350 baht
- Brandy: 48% to 50% of ex-factory price
- Beer: No change
Thai Bev was able to pass on the tax increase directly to its customers.


Non-alcohol Beverages
Sales Revenue is down -40.6% in 1H13 from 1H12, due to the termination of Serm Suk's partnership with PepsiCo which I have discussed in the Thai Bev 1Q13 post.
Company has managed its costs well although advertising and promotion expenses have increased. This is necessary to promote the new drinks under Serm Suk,
The efforts have paid off with est commanding 15-19% market share while shattering PepsiCo to 15% from 48% previously with Serm Suk. Est cola, with a hint of root-beer flavor, is now readily available on almost every corner of Thailand. It also comes in the popular glass-bottled form.
EBITDA and Net Profit margins are negative at -1.8% and -7.8% and I shall wait keenly to see if all these investments turn to profits in the coming quarters.
Read more here;
http://www.businessinsider.com/pepsi-thailand-and-est-2013-3

Food
Sales Revenue jumped +16.0% in 1H13 compared to 1H12 due to an increase in branches and sales prices.
Costs have been kept down remarkably well to 58.9% of revenue, previously 62.1%.
EBITDA and Net Profit Margins have increased likewise, at +58.9% and 183.3%.
Oishi has done the right things this year as they continue ramping up their business.

International Business 1H13 update
Decrease in sales -19%, not much to surprise here with the effects from 1Q13 weighing down on sales from Scotch whiskey and YLQ spirits.
Positive is the +7% increase in Sales Revenue from Asia ex. China attributed to Chang Beer in Myanmar.

C. Balance Sheet
1H13 recorded a slight decrease in cash and accounts receivables. Loans have also decreased and the gain from partial divestment of Oishi has been recognised.
Thai Bev also performed some debt repayment which reduced long term loans by almost 7%.


Since the announcement of results, Thai Bev shares have took a hit and spiralled down further to about 53 cents. According to CIMB,  Thai Bev is almost the cheapest among the regional and global brewers, with the exception of Kirin. It is also cheaper than its F&B peers in Singapore.

Short term punters or technically inclined traders, I'm sure have already parted ways with this share along its downtrend and looking at it today, it should be at or near the lower band of the downtrend channel.
For those with faith in the business direction of this company, the depressed price of Thai Bev presents another opportunity to increase exposure. We have to be realistic in our expectations of Thai Bev as it is a F&B business, not an oil/gas explorer, for example.


Aug 14, 2013

Coca Cola to debut HABU herbal tea in Thailand


Habu herbal tea officially launched for the Thai market, as Coca Cola believed herbal beverages had always been an integral part of Thai culture. The new entrant is targeting the 21 bil baht ready-to-drink herbal beverage business.

The drink is made up of four main ingredients; roselle, licorice, luo han guo and cogangrass.

Coca Cola identifies herbal, herbal-fused and tea-based drinks among the top three popular drinks alongside water and sparkling beverages in food shops and traditional and modern trade stores. Demand for herbal tea has grown by 25% in the past three years.

Coca Cola is optimistic about this product and projects a growth of 25-30% in its first year. They plan to introduce Habu to other countries in the future.

Coca Cola will also spend 800 mil baht (about S$33.3 mil) to promote its non-carbonated drinks this year and at least the same amount next year.

What does this mean?

I believe the advertising and related industry is set for another good year as Thai companies go all out on advertising and promotions this year. I expect next year to be the same if not better.

Participants in the non-alcoholic beverages market include Oishi's tea drinks, and locally we have our Jia Jia Liang Teh, although it can breathe easily this year as Habu will not be launched in Singapore yet. Serm Suk, with its est cola will spend about 1.2 bil baht this year, while Thai Bev will spend another 1.2 bil baht to market Chang beer in 2014. I am sure the other competitors will follow suit in promotions.

I will try to sample Habu soon if I make another trip to the Kingdom, but personally I am not a consumer of Coca Cola's drinks. No offence but to me I would buy a can of Coca Cola to remove stains or clean the toilet bowl, not pour it down my throat.

Namthip is the bottler of Coke, Fanta and Sprite, and I like its innovative way to bottle drinking water. The plastic bottle is thin but some air pressure is used to 'puff' up the bottle and when the cap seal is open, the gas releases and the bottle feels flexible. This enables lesser amount of plastic used in a bottle, which is good for the environment, good for cost savings. Jia Jia on the other hand, the aluminium can feels heavier than all other drink cans I have held, perhaps they are inefficient in that regard.

That aside, I have also personally witnessed the vast distribution reach of Serm Suk, as almost every food vendor, roadside shop and almost every corner I turn, I can see est cola for sale.

Aug 13, 2013

Investments in Asian Hotels Strongest 1st Half since 2008


1H2013 recorded slightly more than USD1.3 bil in transactions throughout Asia, almost double 1H2012. Strong demand for investment grade hotel assets in Asia's established tourism markets of Singapore, Hong Kong and Tokyo as well as deals from emerging markets such as Thailand and the Maldives had contributed greatly to the solid growth in sales activity.
According to Jones Lang Lasalle however, the pipeline of open market listings throughout Southeast Asia is limited, even though there has been improving hotel trading performance and investor appetite. Hotel owners are generally reluctant to sell but off-market deals are still expected to continue.

Rising visitor arrivals, robust trading performance and positive market dynamics have been identified by Jones Lang as factors bringing emerging Southeast Asian markets such as Vietnam, Cambodia and Myanmar back into the investment spotlight.

Transactions in China, India and Indonesia continue to be muted due to challenging ownership structures, even as investor sentiment has improved in these markets. The Chinese market however, has seen significantly lower investment with the confirmed sales in 2013 making up only 10% of the average annual figure of USD800 mil since 2008.

Transactions in Thailand are expected to continue with strong volumes over the short term amidst political uncertainty and an unpredictable investment environment. The recent sale of Laguna Beach Resort in Phuket to Outrigger ranked among the top 5 transactions in Asia for 1H2013. Previously, the Resort had been sold to Singapore-based private equity firm Recap. The Kingdom is on track to be one of Asia's hotel investment hot spots.

Transactions in Japan has increased due to strong domestic corporate and leisure demand. Most markets have risen back to pre-quake levels.

Transactions in Singapore accounted for 44% of regional transactions for 1H2013, mainly due to Park Hotel Clarke Quay at USD238 mil. Singapore is also expected to receive another massive REIT worth more than S$2 bil in 1Q14, with a proposed REIT comprising TCC Land's Hotel InterContinental, Suites@Cairnhill and Frasers Hospitality's properties.   Cross border capital flow analysis in recent years show Singapore growing into a key source market for capital investment in hotels in the region. Japan and Singapore commanded 37% and 34% of investment flows in 1H2013.

Purchaser profile in Asia is made up of funds, institutions and large corporates restructuring their portfolios, becoming net sellers of investment grade hotels. In 1H2013, REITs, hotel operators and institutions were the most active buyers. REITs will continue to have a significant presence in Asia for the long term.

For the coming 2H2013, Jones Lang Lasalle projects hotel transaction volumes to clock another USD1 bil in Asia, slightly beating 2012's figure. Hospitality-focused REITs are now established in several Asian markets with the capability to invest offshore. The REIT law has also been passed in Thailand early 2013, allowing overseas investment.

The availability of investment grade assets in key cities and willingness of sellers to close deals via transparent processes in emerging markets will dictate the overall investment landscape. Investment will continue to be dominated by REITs, private investors, owner operaters and Private Equity.

Asian cities continue to invest in infrastructure, especially in transportation from the airports and major tourism areas. These measures are important to increase visitations and improve business confidence, which ultimately trickle down to fuel real estate investment demand.

Related post:
http://cluelesspunter.blogspot.sg/2013/08/f-asset-restructuring-laying-of.html

Aug 12, 2013

F&N 3Q13 Results (Business Units)

Snapshot of the performance of various Business Units as follows;


Beverages
Overall Beverages revenue +11% compared to same period last year. Profit Before Interest and Taxes (PBIT) +44% due to higher sales volume and better product mix.

Soft drinks revenue +11% Y-o-Y  on higher sales volume.

F&N Sparkling, 100Plus, Seasons and Ice Mountain all had volume growth. F&NHB also began distributing Oishi Green Tea in Malaysia this June.

Breweries revenue +10% on strong volume growth.


Dairies
Dairies revenue -5% yoy and overall PBIT +9% higher compared to same period last year, mainly contributed by performance of Dairies Thailand's favorable sales mix and cost management initiative.

Dairies Thailand revenue lower this quarter due to lower export sales.

Co-branding of Teapot brand with Tourism Authority of Thailand and branding of evaporated milk with food ambassador will further reinforce its market leadership.

Dairies Malaysia revenue declined due to price competition. Dairies Malaysia has rolled out targeted tactical, trade and marketing activities to boost consumer consumption.

Dairies Singapore had domestic sales growth but affected by lower export sales.

F&N Creameries revenue and volume both marginally lower.



Printing and Publishing
Overall revenue -6% despite strong export revenue for Education Publishing and higher print output. PBIT -78% lower.

Closure of loss making businesses produced savings which were used to invest and expand the Education Publishing business. Closed business interests were the Library Reference business in USA and domestic education publishing business in Malaysia.


Commercial Property
Overall revenue +20%, PBIT +46% over corresponding period last year.

Investment Property: Revenue and PBIT -6% and -13% compared to last year due to divestment of Frasers Property China. Otherwise, performance would have been +18% and 27% respectively.
Operation of investment properties are in Singapore and Vietnam.

Singapore: Rental income higher compared to last year.
Retail Malls: 99% average occupancy rate.
Industrial/Office: 98% (except Valley Point Office Tower 92% from 57%)
Vietnam office building average occupancy rate 100%

Hospitality: Revenue and PBIT +51% and +141% Y-o-Y, due to new properties in UK, Aus and SG. Daily rental rates and occupancy generally increased.
Share of results from Frasers Centrepoint/Commercial Trusts were +79% at S$14 mil, operating results of the two trusts were higher over same period last year.


Development Property
Revenue +8% to S$314 mil compared to same period last year, due to revenue recognition on completion of a development project in Australia, higher sales of completed projects in China and Thailand. PBIT +8% to $59 mil. There was also a provision (S$9 mil) set aside for foreseeable losses on a development site in Australia.

Singapore: Revenue -23%, PBIT +1%, due to lower marketing expenses.
Overseas: Revenue increased 8.3 times to S$100 mil due to completion of project in Australia and higher sales in China and Thailand. PBIT S$8 mil.

Others
PBIT lower due to higher foreign exchange losses.

You may read the CIMB research report as well here;
https://cimbequityresearch.cimb.com/EFAOnTheWeb/EFAWebAPI/GetDocPDF.asp?DocGUID=D7C73CC4-2A03-4416-9348-E7FA883C4CB6&A=CIMB



Aug 7, 2013

F&N asset restructuring; laying of groundwork?

According to CIMB, two possible scenarios are;
1. F&N sells property arm to TCC, valued at S$7.7bn excluding any discount to value. TCC can afford this by paying back its 61.7% stake in F&N worth S$8.5bn. F&N becomes a pure F&B company with Thai Bev holding the majority of shares. Oishi and Serm Suk will then be injected into F&N.

2. F&N sells F&B business to Thaibev, estimated between S$2.7-2.8 bn. Thaibev can afford this by paying back its 29% stake in F&N worth S$3.6bn. Thaibev will no longer be exposed to property and have all F&B interests housed under one entity, easier to derive synergies.


As I was reading the local Bangkok Post yesterday, I saw an announcement by Krung Thai Asset Management (KTAM) which said that real estate companies controlled by Khun Dhanin's Charoen Pokphand Group and Khun Charoen's TCC Group are poised to mobilise 27.5 bn baht (~S$1.15 bn) in selling separate property funds to the public.

CP Land is planning an IPO for a 10 bn baht leasehold property fund, which will invest in Fortune Town, CP Tower (Silom) and rental offices on Phaya Thai Road.

TCC Group is planning to increase the size of its Thai Retail Investment Fund to about 20 bn baht from 2.5 bn baht.

KTAM is the fund manager for both funds and expects fund raising to be completed by the end of this year. KTAM will also be fund manager for another property fund to be launched soon that will invest in a five-star hotel worth 18 bn baht. Current projects in the pipeline for KTAM include negotiations to manage infrastructure funds worth 2 bn baht to invest in recycled energy.

Chief Executive of KTAM, Khun Somchai, expects his company's AUM to hit 500 bn baht at the end of this year.


Related posts:
1. http://cluelesspunter.blogspot.sg/2013/07/thai-bev-18-july-2013-do-you-see-window.html
2. http://cluelesspunter.blogspot.sg/2013/07/krung-thai-bank-stock-reaction-to_17.html

Bumrungrad Hospital 2Q13 results

Here are some snippets from the results released today, 7 Aug 2013.

Total Revenues: +10.0% Q-o-Q to 3,591 million baht

Net Profit 2Q13: +16.0% to 579 million baht

Net Profit Margin 2Q13: 16.1%, compared to 15.0% in 2Q13
Net Profit Margin 1H13: 16.6%, compared to 16.3% in 1H12

Inpatient/Outpatient service revenues: +6.5% and +14.0% respectively
Revenue from International/Thai patients: 61.2% and 38.8% respectively

Cost of hospital operations 2Q13: +8.0% Y-o-Y to 2,204 million baht, also due to ongoing CAPEX especially for campus expansion.

Basic EPS 2Q13: +16.0% Y-o-Y to 0.79 baht
Diluted EPS 2Q13: +16.0% Y-o-Y to 0.67 baht

Cash and Cash Equi.: 6,120 m baht in 1H13, compared to 2,272 m baht in 1H12
Liquidity Ratio: 3.7x in 1H13, compared to 3.6x in 1H12


Related post
http://cluelesspunter.blogspot.sg/2013/08/field-visit-bumrungrad-hospital-4-aug.html

Field visit - Bumrungrad Hospital, 4 Aug 2013

I have been in Bangkok for more than a week and decided to drop by for a quick visit to Bumrungrad Hospital.



Bumrungrad is the first hospital in Thailand to achieve JCI accreditation, and also the largest private hospital in Southeast Asia. Bumrungrad is a one-stop medical center, offering diagnostic, therapeutic and intensive care facilities.

As I wander around the various buildings of the medical center, most of the human traffic I see are Middle Eastern folks, followed by Asians (Japanese, Thai), and a handful of Westerners. Many of them are accompanied by family; there are various packages that cover the patient's treatment and their families' stay for a duration. As of June 15, 2013, the hospital's Hospitality Residence ceased its operations, however patients' families are assisted to make hotel reservations nearby.

Bumrungrad is also going to host an event called "Healthy Mom, Healthy Me" from 6-8 Aug, probably timed with the upcoming Mother's Day. There will be free basic health screenings, facial analysis, breast self-exam demonstration, health consulting and customised health screening packages will be on offer.



I took the lift up to the 10th floor, which is the Mezz sky lobby. It is a lounge that has been tastefully landscaped with zen stone-scapes and a koi pond. There is a Starbucks situated in a corner. The lounge has various foreign service desks, each has a national flag (Chinese, Korean, Internationals) and staff trained to converse in the language of purpose. There is a business center which visitors can also get help for hotel reservations, and a visa extension service desk.

I find the overall environment similar to a 5-star hotel. It is peaceful without loud noises; good for patients to recuperate. Most importantly, there are ample service staff at various locations to assist visitors, and I must say, this is where it has the edge over private hospitals in Singapore.

I still vividly remember my personal incident at Mt. Elizabeth Novena. It occurred when I was having my blood drawn for a test, and the syringe was repeated drawn multiple times as the needle was not inserted properly, each draw yield a bit of blood until the quantity was enough. As I watched my own frothy blood and the terribly inexperienced nurse, I knew for sure that I would never trust my life (or money) with this hospital.

To round up my quick tour, I took a look around the surroundings of the hospital. There are various embassies in the area, and also numerous Muslim restaurants and vendors to cater to the visitors. Accommodation wise, there are both economical as well as higher-end hotels surrounding the hospital.

Having seen the hospital up close myself (but not very detailed), I believe it will continue to grow and consistently receive medical tourists. However this write-up is just to share my experience and readers should not base this as a decision to buy the listed share or for medical procedures.