Fraser & Neave (F & N)

[jaco]

@weijian

All fair comments regarding the issue. However, we are left with the original question: why the recent share buy-backs of F&N itself ? They haven't done those since 2015. Is it really a coincidence that the buy-backs are resumed at the same time as the share-swap within the same business group?

Again, I am not holding my breath while waiting for a privatization. I just observe the developments with interest. I might ask about the share buy-backs at the upcoming AGM, although some generic, cookie-cutter answer might be expected.

[weijian]

Hi jaco,

Maybe the "independent" BOD finally awoken to the IFA's fair valuation of 3.55sgd, and decide to do some real value investing for shareholders now. There is great uncertainty in terms of the motivation for SBB, but great certainty in terms of the end result of SBB for shareholders' value creation.

P.S. Looking forward to reading and learning from the great pre/post AGM Q&As from VBs

[jaco]

One more post on the issue. I only found this report just now after a reference in The Edge this weekend and thought it should be part of the discussion ...

https://www.dbs.com.sg/treasures/aics/te...122024.xml

DBS Research points out that ThaiBev already privatized Oishi Pcl and Serm Suk Pcl (both in Thailand) recently. DBS believes that ThaiBev might be consolidating its F&B interests in order to spin those off later. Such a spin-off would be a step further than just 'cleaning up' the group structure, but also suggests a F&N privatization.

[weijian]

Hi jaco,

It is the job of the investment banking unit of every bank to be pitching possibilities to their clients. It is definitely beneficial to the bankers to have these series of privatization/spin-offs - privatize all food related businesses, consolidate and then spin them off 1 by 1 into FoodCo, BeerCo, SpiritsCo etc.....End of the day, ThaiBev becomes a holding company and the bankers will suggest a name change to ThaiBev Holdings or worst off ThaiBev Strategic (Yoma Strategic anyone?). A VB keyboard warrior like me can do it just as good as those folks in suits.

But the key question is - is it beneficial to Chaoren Juniors who are taking over? A lot of Asian family-owned companies are in the business of sustaining wealth for themselves, as the prior generation had already created the wealth. Sustaining wealth and creating wealth may have overlapping actions but both are much more different than similar.

So first and foremost, rather than listening to possibilities from the mouths of people who are hoping to earn fees from it, we have to decide on Chaoren Juniors' intention first before we open our ears to their "flowery language".

[weijian]

If I remember correctly, Farm Fresh Bhd is probably one of the first bigger scale milk brands to operate a dairy farm on Msian local soil, as far back in 2009 based on their own prospectus. In recent years, Farm Fresh seemed to have overtaken Magnolia in the RTD category in Msia too. The AgriValley project looks to be me, is just playing catchup. In time to come, it should improve F&N's fortunes although it comes at a pretty dear cost wrt to the amount of capital they have to sink in, just to match to their competitors.

MINUTES OF THE 126TH ANNUAL GENERAL MEETING

Mr Mano noted the scale of the Company’s integrated dairy farm in Malaysia (also known as F&N AgriValley) and asked whether it would enable the Company to penetrate other geographical markets. Mr Hui responded that the first phase of F&N AgriValley is primarily dedicated to supplying fresh milk to meet the needs of Malaysian consumers, with some of that supply being directed to Singapore. He added that plans to expand into other markets would be considered in subsequent phases.

Mr Thapana also noted that the COVID-19 pandemic had underscored the importance of food security. In this regard, F&N AgriValley provides an opportunity for the Group to work closely with the Malaysian government to contribute towards national food security. Mr Thapana also emphasised that in relation to F&N AgriValley, the Group actively engages with business partners and experts in the dairy industry to leverage their expertise and insights.

Mr Ooi applauded the Company for pursuing the F&N AgriValley project, noting that it presents an opportunity to make a significant impact in the ASEAN region.

Mr Koh reiterated that the Company’s choice of cows for the F&N AgriValley project was driven by the fact that cows from the USA are significantly more productive than cows from Australia. Given the Company’s requirement for a sufficient scale of operations, there would have been little point in purchasing cows that do not produce enough milk for sale.

https://links.sgx.com/FileOpen/FNL%20Min...eID=833110

wow~ 126th AGM!

[jaco]

If I remember correctly, Farm Fresh Bhd is probably one of the first bigger scale milk brands to operate a dairy farm on Msian local soil, as far back in 2009 based on their own prospectus. In recent years, Farm Fresh seemed to have overtaken Magnolia in the RTD category in Msia too. The AgriValley project looks to be me, is just playing catchup.

@weijian , I think your observation is correct. I live in Malaysia and tbh I drink Farm Fresh myself, even as a F&N shareholder and not being a Farm Fresh shareholder (its share price seems overvalued ever since its IPO). I prefer the taste of Farm Fresh over Magnolia and Farmhouse. I also believe that freshly produced milk is healthier than milk powder with water added back to it. I just googled whether this is actually true and the health benefits seem to be only marginally better. Yet, I believe most consumers will prefer locally produced fresh milk. F&N has to react to the rise of Farm Fresh.

On another note, I visited the AGM of Fraser & Neave Holdings Berhad. The integrated dairy farm was also the most discussed subject in the Kuala Lumper meeting. There are setbacks related to the import of cows, but I believe those can be overcome. Management mentioned that sales of non-productive cows for beef production will generate an additional and significant revenue stream. However, F&N does not plan to produce or market packaged meat themselves.

[weijian]

Hi jaco,

Thanks for giving more insights from your AGM attendance. It is something that one wouldn't be able to effectively gather from a pure online perspective and so VBs really value such sharing.

- It does seem that consumer facing "brands" always seem to be overvalued from a "value investor" perspective whether is it FarmFresh or 99speed mart, isn't it? When I looked at 99speed mart during its IPO, it was priced at 1x of ShengSiong's valuations (and SSG ain't "cheap" to start with) but it has much poorer margins and operating metrics (key been inventory turnover). But alas, animal spirits does work. There is (almost) no animal spirits in the Spore market but another way to see it is, Spore domestic market is too small to support such brands to build enough scale for a listing on the local bourse. I would imagine at many folks who invested in the local market, are dying for more "animal spirits" than "cheaper valuations".

- If I remember correctly, the integrated farm is a jointed venture with one of the royalties. How do you think of this "joint venture" with the yellow robes? I believe the sort of setbacks you mentioned, are definitely temporary since "yellow hilangs" are guiding from above.

- As for selling older/less productive dairy cows for meat, I do not think they will be recognized as revenue. These dairy cows will be classified as PPE on the balance sheet and depreciated over their expected useful lives. So when such PPE is sold, it will be classified as other income/loss depending on the difference between the sale price and residual useful value. So any sort of "gains" is also dependent on their depreciation policy for their cows. Finally, one can't expect to find the meat on JayaGrocer/VillageGrocer's steak shelves. ChatGPT says old dairy cows are called "culled cows" and generally sold as ground meat to be made into patties/animal feed etc. My guess is that such PPE disposal will probably cover the costs of PPE losses (dairy cows dying earlier ahead of time due to sickness etc)