What will keep Fraser & Neave afloat?

Subisidiary after subsidiary is suffering losses but its pre-sold property segment will be a surprise earner.

Fast-selling developments like Punggol Watertown, Seastrand and Boathouse will support the listed food and beverage conglomerate at a time when its core subsidiaries like soft drinks and dairies are in the red.

Here's more from Maybank Kim Eng:

Troubles come in battalions. Subsidiary F&N Holdings Bhd’s (FNHB) 62% drop in earnings for 1Q12 affected the Group’s net profit. The poor numbers reflected the impact of the massive floods in Thailand and the cessation of the Coca-Cola franchise from 1 Oct 2011. Its Thai dairy unit reported an operating loss of RM12m while soft drinks revenue dipped 22% YoY and 27% QoQ in the absence of the franchise. Meanwhile, the Malaysian dairy unit continued to be affected by the reduced sugar subsidies in Malaysia as revenues dipped 12% and operating profit plunged 75%. Breweries were the only bright spot for F&N.

Property earnings to support. Property development revenue dipped 34% YoY to $181m in 1Q12 due to the effects of completed projects in Singapore and lower sales from overseas development projects. However, we expect pre-sold development projects such as Punggol Watertown, Seastrand and Boathouse to underpin earnings in the next two years. The Group continues to replenish its residential landbank. It had submitted the top bid of $345.9m (or $534 psf ppr) for the tender for a site in Bedok South Avenue 3, which closed yesterday. This was only 1% higher than the second-highest bidder. We estimate RNAV accretion of $0.02/share for this project.