Escalating alcohol dependency puts Fraser and Neave under threat

Beer hogs the spotlight as soft drinks lose fizz.

Fraser and Neave may be under threat as beer sales hog the lion's share of its profits.

Analysts note that with the valuation of Myanmar Brewery (MBL) still up in the air, F&N could be at risk of huge share price valuations.

CIMB analyst Kenneth Ng noted that beer now contributes around 60% of F&N's profit before interest and tax, while its once-stellar soft drinks business was impacted by the GST in Malaysia.

"A big driver of F&N's growth is from beer, and that is at risk of being sold off for a song," Ng said.

DBS analyst Andy Sim noted that while beer sales surged 27% year-on-year, MBL's valuation continues to cloud F&N's outlook going forward.

"We have based our sum-of-parts valuation and recommendation on the basis that the valuation for F&N's stake in MBL is around $1.2bn (based on 21x FY15F PE). If the final price transacted is substantially short of our expectations, this could have a downside impact to its share price," Sim noted.

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Penilaianmu: MagBe