Tuesday 27 Feb 2024
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KUALA LUMPUR (Nov 8): Fraser & Neave Holdings Bhd (F&N) shares rose to a six-month high of RM27.02 in Wednesday morning trade, after it declared a dividend of 50 sen per share after reporting its highest full-year profit in 13 years.

The stock was up RM1.20 or 4.65% from its closing price of RM25.82 on Tuesday (Nov 7), giving it a market capitalisation of RM9.91 billion. About 59,800 shares changed hands.

On Tuesday, F&N declared a final dividend of 33 sen per share and a special dividend of 17 sen per share, after it reported a 40.11% jump in its net profit to RM536.9 million, and an 11.8% increase in revenue, to reach a record-breaking RM5 billion for the financial year ended Sept 30, 2023.

The group's highest full-year profit since FY2010 — when it logged a net profit of RM695.29 million on a revenue of RM3.64 billion — was driven by festive sales and out-of-home consumption, as well as contributions from snack and candy maker Cocoaland Holdings Bhd.

In a note on Wednesday, Kenanga Research said it was raising its target price for the stock to RM29.40, from RM28.45, after raising its estimates for F&N's FY2024 net profit by 3%. 

The target price is derived from a price-earnings ratio (PER) of 22 times FY2024 estimated earnings, which is consistent with the industry's average forward PER, it said.

"F&N’s earnings prospects remain positive, supported by the normalisation of economic activities and consumption patterns, the return of international tourists to Malaysia and Thailand, coupled with a rebound in export sales. 

"Moving forward, we understand that the group is set to continue to navigate market volatility by leveraging its diverse brand portfolio, employing strategic route-to-market initiatives, executing in-store strategies, and maintaining consistent brand building and customer engagement," it said.

Kenanga Research kept its Outperform rating on the stock, and said it continued to like F&N for the solid rebound in demand for its products, especially in the beverage and ready-to-drink categories, as economies have restarted and border restrictions have lifted. In addition, it also likes the counter for a resurgence in export sales, driven by competitively driven products, steady demand for essential food items, and the expected recovery in the Thailand market, driven by a revival in domestic consumption and a resurgence in tourism.

Meanwhile, TA Securities said it was maintaining its "buy" call and dividend discount model-driven target price of RM29.70 per share on F&N.

"As we approach the year-end school holiday and festive season, we anticipate a consistent and strong demand amid continuous effective margin management, to enhance profitability in this challenging environment, particularly considering the persistent high costs of key inputs, especially sugar.

"Looking ahead to 2024, we believe that a moderate price adjustment may be necessary to offset the effects of increasing excise duties on sugary drinks. However, it's worth noting that we do not foresee any significant consequences resulting from this price adjustment, as purchases of ready-to-drink products are typically driven by impulsive spending," TA Securities said.

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