Sale of Fraser Business Park to re-charge F&N's balance sheet

KUALA LUMPUR: Fraser & Neave Holdings Bhd's (F&N) foray into property development paid off well when it recently sold the second phase of Fraser Business Park in Pudu for RM63 million, which netted the group a gain of RM29.6 million.

The proceeds will also re-charge F&N's war chest to an estimated RM418 million (after it paid out RM530.9 million in dividends and special dividends), which will come in handy for the group to kick-start another major development project in Petaling Jaya.

In a filing with Bursa Malaysia on Wednesday, Jan 26, F&N said it made a gain of RM29.6 million when it sold the second phase of the project via the disposal of its wholly-owned subsidiary Brampton Holdings Sdn Bhd to Tenggara Muhibbah Sdn Bhd.

The disposal is deemed to be another regular effort by F&N to recycle its capital and charge its balance sheet to reward shareholders as well as fund new business expansion opportunities.

Before the disposal of Brampton, the group had last July divested its glass manufacturing unit Malaya Glass Products Sdn Bhd for US$221.7 million (RM676.19 million). The disposal bumped up its cash reserves to almost RM940 million as at Sept 30, versus borrowings of RM300 million.

F&N then paid RM54.6 million to acquire a 23.08% stake in Cocoaland Holdings Bhd in November and subsequently declared and paid out RM530.9 million in dividends to shareholders. This brought down its cash reserves to RM355 million but with the RM63 million proceeds from the sale of Brampton, its cash balances could recover to RM418 million.

The group has been busy with new activities. After the acquisition of Cocoaland, F&N had a few weeks ago said it got the approval from its Singapore-based parent Fraser & Neave Ltd to market and distribute drinks in Thailand and Brunei.

In addition to the food and beverages business, F&N is also expanding its reach in property development. On its drawing board is the plan to redevelop a 12.7-acre site in Section 13, Petaling Jaya into commercial and residential properties with a gross development value (GDV) of RM1 billion. This will be its second major project after Fraser Business Park.

The land in PJ currently houses F&N's dairy manufacturing plant, which will be relocated to Pulau Indah by year-end.

Some doubt if F&N can carry out such a big development project in PJ without a partner.

"F&N's track record in the property development is still unproven as it has only developed the Fraser Business Park. This project is definitely on a larger scale given the GDV value is RM1 billion," said an analyst with a local research outfit.

He further opined that F&N should either find a strategic partner to develop the land, or sell it to focus on developing its core business.

To be fair, F&N completed the development on its Fraser Business Park on time and sold the first and second phases. Moreover, it is well capitalised to undertake a project of such scale.

For FY10 ended Sept 30, F&N posted RM695.3 million in net profit on the back of a RM4 billion revenue. Its net asset per share was RM5.03.

F&N closed unchanged on Wednesday at RM15.54 with 869,800 shares done.