KUALA LUMPUR (May 6): Fraser & Neave Holdings Bhd (F&N) shares surged to their highest in five years on Monday, as better-than-expected results buoyed investors' optimism, while analysts maintained their calls following a briefing.
F&N rose as much as 3% or 96 sen to RM32.96, its highest since April 2019, before ending the day at RM32.24 — still up 24 sen or 0.75%, valuing the food-and-beverage company at RM11.83 billion on Bursa Malaysia.
Excitement in the market is building up over the company’s dairy farm project, which appears on track for its first milking by early 2025, analysts said.
“While not profitable over the near term, the scale of the project implies a significant footprint into a highly lucrative segment,” UOB Kay Hian said. “Existing brands and an extensive distribution network should see a seamless integration.”
Shares of F&N have risen some 25% so far this year as investors seek refuge in companies that sell staple products to weather tough times ahead. The government is set to implement a slew of measures, ranging from trimming subsidies for fuel to imposing new taxes on luxury goods, this year.
Analysts covering F&N have issued five “buy” recommendations, while the remaining two have “hold” calls. The consensus 12-month target price is RM35.61, according to Bloomberg data.
F&N is aiming for a production of 100 million litres of milk for its initial phase, with capital expenditure of RM1.7 billion for the next three to six months, according to analysts who attended the company’s briefing.
“However, the yield may be affected by the cows’ adaptability to the hot and humid weather in Malaysia,” TA Securities flagged.
In the near term, F&N is banking on cost control and targeting higher sales volume, instead of price increases, said MIDF Amanah Investment Bank.
The company had already increased prices for ketupat and “gummy bears” in the financial year 2023 (FY2023) and “management does not foresee any price hikes in the near term and, instead, would focus on cost optimisation, with a price hike being considered only as a last resort,” the research house said.
F&N is also investing in a manufacturing facility for dairy products in the Suvannaphum Special Economic Zone in Cambodia for US$37.5 million (RM179.5 million), which will produce sweetened beverage creamers by the first quarter of FY2026.
For Kenanga Investment Bank, which “came away from the post-results briefing feeling positive” on F&N’s prospects, the venture is “a natural progression, spurred by growing exports to [the] Cambodian” market, which currently contributes an estimated 5% to 7% to F&N’s total revenue.
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