TODAY'S HEADLINE  


F&N MAY LOSE DRAW AS PROPERTY PLAY  


Without APB, soft  drinks, dairy operations, its popularity among fund managers may wane
With a nod to Heineken's o'er to buy its stake in Asia Paci'c Breweries (APB) for $5.1 billion or $50 a share last Friday, the wheels may have been set in motion for Fraser and Neave (F&N) to break up and  ' many expect  '  become a pure property play.
Becoming just another property group, however, could make F&N less attractive to investors than what it is now. But 'rst, F&N shareholders need to agree to the Heineken deal. Along withother conditions, approval from F&N's shareholders at an extraordinary general meeting (EGM) is required. This would be a simple majority of shareholdings represented and voting at the meeting. Once that is obtained, Heineken will make a mandatory general o'er for the rest of the Tiger Beer brewer for a further $2.4 billion.

And so, the question that will now fan the market's imagination: what will F&N be after the sale of APB? In terms of its existing por''olio, F&N will be left  with its soft  drinks business, which brought in $113 million in pre'tax earnings in FY2011; dairy operations ($37 million); printing and publishing ($27 million); commercial property ($161 million) and development property ($408 million). APB had contributed $372 million in pre'tax earnings in FY2011. Clearly, without APB, the property business will become F&N's dominant earnings driver by far.

Still, becoming a pure property player is by no means the only option. F&N could remain a conglomerate. It could use the cash from the APB sale to rebuild its food and beverage (F&B) por''olio. It could turn predator, and acquire F&B, or even brewery assets elsewhere.

It could, on paper at least, divest everything including its property assets, return all its cash to shareholders, and delist.

The market, however, is be''ng that F&N will sell its other assets and focus on property. Its soft  drinks business, along with its dairy business, is seen attracting potential buyers, including the likes of Kirin and Coca'Cola. With the cash from APB, and other potential asset sales, F&N would be able to invest substantially in its property business, which now has residential properties, serviced residences and commercial properties in markets including Britain, China, Australia and Singapore. But that could make F&N a less attractive stock in the longer term.

NEWS BUZZ
DBS Group (S$14.75) 
Q2 pro't up 10%, beating expectations
DBS Group's net pro't rose 10% to $810mil in the 2Q from a year ago. Loans growth is likely to slow to an annual pace of 10%. The better'than'expected performance in Q2 was driven by higher net interest income, which rose 10% over the year to $1.32bil, as customer loans expanded 22% to $205.2bil. The strong loan growth was partly o'set by narrower net interest margins, which measure how pro'table its lending activities are. DBS' average net interest margin shrank to 1.72% in Q2 from 1.80 per cent a year earlier and 1.77 per cent in Q1 this year. Its annualised EPS in Q2 was $1.34. The board declared a 'rst'half dividend of 28 cents per share, the scrip dividend scheme will be applicable to the dividend.

CapitaLand (S$3.12) 
To acquire hotel in London for ''158.8m
CapitaLand's wholly owned serviced residence business unit, The Ascott Limited, has signed an agreement to acquire a prime hotel operating in London for ''158.8mil (S$311mil). Ascott  will manage the 230'unit hotel, The Cavendish London, in the 4Q12 and will be subsequently transformed into a luxurious serviced residence under the premier Ascott  The Residence brand and will be named Ascott St James London.

SembCorp Industries (S$5.29) 
Q2 earnings rise 9% to $190.7m
Oman water and power plant to have IPO within 2 years   SembCorp Industries saw 2Q net pro't attributable to shareholders climb 9% to $190.7mil in the same period last year because of its better'performing utilities business. EPS improved in Q2 and H1 of 10.67 cents and 20.57 cents respectively. In the 'rst half of 2012, revenue gained 22% year'on'year to $5.1bil. It did not declare a dividend for the period ended June 30, 2012. Mr Tang said at a media and analysts brie'ng that the Salalah IWPP venture will have an IPO within two years. He said SembCorp answered all questions from the Chinese Anti'Monopoly Bureau (AMB), if there are no other questions from them,  he said the acquisition should wrap up by end'August or early September and AES would add to Sembcorp's income base from China.
Source: The Business Times

Source: AmFraser