What's next for F&N after bidding farewell to lucrative MBL?

It will have cash worth $1.18b.

Fraser and Neave (F&N) is facing a fork in the road after finally settling the sale of its lucrative stake in Myanmar Brewery (MBL).

According to DBS, the sale will cause F&N’s balance sheet to balloon a whopping $1.18b. How F&N deploys its cash will be of key interest in coming quarters, and DBS listed three possibilities regarding the group’s substantial war chest.

First, F&N could become a contender for the Vietnamese Ministry of Industry and Trade’s stake in Saigon Beer Alcohol Beverage (SABECO). Among the reported contenders for SABECO are loacl and international brewery groups such as Heineken, Asahi and SABMiller.

Another possibility would be a re-entry into the Myanmar market with ThaiBev, particularly as ThaiBev is already importing its Chang Beer into the country.

“In the initial phase when Myanmar was opening up to foreign investments, there were purportedly four brewery licences, of which two were awarded to JVs of Heineken and Carlsberg. There are also possibilities, in our view, that FNN/ThaiBev could land with one of the remaining two, as and when the authorities decide to award it,” said DBS.

Lastly, F&N could simply choose to return the cash to its shareholders, as it had already done so in the past.

“FNN has conducted two rounds of capital reduction since the disposal of its stake in Asia Pacific Breweries Ltd. In total, it has returned about S$5.3bn or S$3.70 per share. However, we believe this will be at a later stage, when the FNN board and management feel that there are no better uses for the cash,” DBS said.