Thai Bev

Thai Bev: Myanmar Economic Holdings Limited (MEHL), the military-linked Myanmar conglomerate has won the arbitration case against F&N that will give it the right to buy F&N's 55% stake in MBL (Myanmar's biggest brewer with over 80% market share). MEHL already owns the remaining 45% stake in MBL. The arbitration was held in Singapore. ThaiBev owns a 28.6% stake in F&N. On the bright side, the tribunal has ruled that MEHL's valuation of US$246m for F&N's 55% stake does not represent a fair value and the sale should take place at a price to be determined by an independent valuer to be appointed by both parties. Based on UBS' rought estimate of MBL earnings ($60-80m) and assuming a range of 20-30x PE, FNN could receive as much as $650m to $1.2b for its stake. UBS estimates that FNN contributes ~5% to Thai Bev's total annual profits and Myanmar Brewery's contribution to FNN earnings could be as high as 30%. In the event FNN sells its entire stake in MBL, potential impact to Thai Bev's net profits could be 1.5-2%. More importantly, the house believes this could help crystallise FNN's value and pave the way ofr the long awaited FNN/FCL stake restructuring between Thai Bev and TCC Assets. UBS keeps its Buy rating with TP $0.84.