Yeo Hiap Seng

Yeo Hiap Seng: Maybank KE has a rpt out on the group, notes that management is taking steps in the right direction towards docusing on building up its F&B business. For FY12, F&B operating margins were just 2.3%. These margins are significantly lower than peers, which MBKE believes that there is upside potential given its market share (no.1 for Asian drinks in Singapore/ Malaysia). The company is in the midst of reorganizing its plants to improve overall efficiency. In Cambodia and Indonesia where Yeo Hiap Seng has been enjoying high growth in, group has earmarked significant capex for two new major manufacturing plants- which will likely commence operations in 2015/2016. The company completed the privatization of its Malaysia subsidiary in Jan 2013. This will give it a higher share of F&B profit going forward. Its last property project (Jardin) will be completed this year, and management will also seek to divest its sizeable landbank should opportunity arises. MBKE see latent potential in the Group’s F&B business, but warn that improvements in margin and more meaningful geographical expansion will likely be a multi-year story. In the immediate term, costs are likely to remain high due to new product launches and start-up costs. MBKE maintains HOLD with TP of $2.55.