Mainboard-listed Thai Beverage (ThaiBev) is set to use Singapore-based Fraser & Neave (F&N) to expand its business outside of Thailand, says a CIMB report.
CIMB said a key takeaway from a recent meeting with F&N management was confirmation of its view that ThaiBev will use F&N to grow its non-Thai business.
ThaiBev had earlier announced it plans to complete the corporate restructuring of both F&N and Frasers Centrepoint by September this year. ThaiBev holds a combined 28 per cent stake in the two firms.
"We retain our view that most likely, ThaiBev will first divest (itself of) Frasers Centrepoint and use the proceeds to enlarge its stake in F&N," said CIMB analyst Jonathan Seow in the report out on Thursday.
On F&N, Mr Seow said he likes its regional expansion story, and expects the firm to be among the bidders for Sabeco, and to also gradually increase its Vinamilk stake, now at 18.74 per cent. Sabeco is the top beer producer in Vietnam, while Vinamilk is the country's largest dairy company.
Mr Seow noted that F&N, which has openly declared its intentions to increase its stake in Vinamilk, is unlikely to overpay for Vinamilk shares on the open market. "The ideal scenario would be to buy a bigger stake from SCIC (the state government which still holds a 36 per cent stake). The timing of such a share sale remains unknown."
He said F&N has also expressed its ambitions and interest in Vietnamese beer assets, primarily Sabeco, although the management shared nothing on the potential valuation multiples it is willing to pay.
CONFIRMING ITS ASSUMPTION
We read F&N's plans to acquire assets in Vietnam as confirming our base-case assumption that ThaiBev will use F&N to acquire assets outside of Thailand.
CIMB ANALYST JONATHAN SEOW
"F&N's latest net gearing stands at 3 per cent, and it is comfortable to raise this further should there be merger and acquisition opportunities. Between Sabeco and Vinamilk, we understand F&N can comfortably acquire either one of the assets, but would likely have to tap equity markets if both targets were to become available at the same time," said Mr Seow.
"We read F&N's plans to acquire assets in Vietnam as confirming our base-case assumption that ThaiBev will use F&N to acquire assets outside of Thailand."
CIMB reiterated its "add" call on ThaiBev, with an unchanged target price of $1.07. ThaiBev shares closed flat at 91 cents yesterday.