Fraser & Neave to benefit from China ventures

China Dairy have teamed up with F&N Dairy Investments to establish a 45:55 joint venture to build a premium milk powder production facility in China. The JV company will promote one of F&N's premium brands that will be complementary to China Dairy's local brands. Total development costs will come down to RMB92.1 million and the new plant is expected to churn out 12,000 tonnes of milk powder per annum.

This new venture located in Xi'an City will boost F&N's presence in China. Moreover consumers in China are expected to go for well established milk powder brands on cases of food poisoning from inferior grades of milk powder. This JV will boost China Dairy's profile as well as F&N's entry into the fast growing China beverage market. Other F&N's venture in China includes Tiger Beer's breweries in China, the partnership with Vinamilk and publishing & media company Fung Choi. Investment bank Merrill Lynch today increased the price target of F&N to S$21.90 per share based on 13.9x FY2006 earnings.