F&N/APB

F&N/APB: UOB Kay Hian has strategy report titled ‘M&A Fever’. Note that M&A continues to excite in Singapore. House highlight several scenarios that could play out for F&N Limited (NON-RATED). House note that FNN’s RNAV is $9.54/share, based on the valuation of its stake in APB at $50/share, and FNN may trade closer or even at a premium to its RNAV should a bidding war erupt for its APB stake. Based on the latest closing share price of FNN, the stock is trading at a 12% discount to its estimated RNAV. Based on estimates, every 10% change in APB’s share price would change F&N RNAV by 2%. F&N will have until 3Aug to decide on Heineken’s offer. In house view, F&N could possibly decline the deal as its existing shareholders such as Kirin Holdings and Thai Beverage may not agree to Heineken’s offer given the strategic nature of APB to these two Co’s. Other than the obvious synergy of APB to Kirin and Thai Bev, the divestment of APB will leave F&N’s assets primarily in ppty and this could be viewed as non-complementary to Kirin and Thai Beverage. At $50, APB would be trading at an annualised 2012 P/E of 26.2x. Given the strategic nature of APB to Kirin, Heineken and Thai Beverage, would not discount the potential for a counter-bid to Heineken’s offer. However, APB’s premium valuations could deter a counter- bid as valuations of peers, including Thai Beverage, is estimated at a range of 13-18x. Against this background, believe any further strength in F&N’s share price closer towards RNAV estimate of $9.54/share could be an opportunity for investors to lock in gains.