KUALA LUMPUR (Aug 3): Analysts expect Fraser & Neave Holdings Bhd (KL:F&N) to face another challenging year as dairy expansion losses, weak Indochina demand and foreign exchange headwinds continue to weigh on earnings. 

However, with the stock down nearly 22% year to date, most believe these challenges are already reflected in its share price and expect earnings to recover from financial year 2027 (FY2027). 

F&N’s three months ended June 30, 2026 (3QFY2026) net profit rose 10.3% to RM93.6 million, but its 9MFY2026 earnings missed expectations due to ongoing dairy farm losses, start-up costs for its new Cambodia dairy plant, higher logistics expenses and foreign exchange impacts.

Following F&N’s third-quarter results, Kenanga Investment Bank said the stock has largely priced in weak Indochina performance and dairy farm losses, but not the long-term growth potential of its integrated dairy business.

Kenanga kept its “outperform” recommendation but trimmed its earnings forecasts by 5% for FY2026-FY2027, as well as the target price (TP) to RM34.45.

“While we understand that fresh milk currently contributes a low single-digit percentage of group revenue, we believe the segment remains a key growth driver as distribution expands and consumer adoption increases,” said Kenanga. 

It said earnings should improve as the new Cambodia dairy processing plant begins commercial operations, and demand from Thailand stabilises, as well as losses from F&N AgriValley easing as production ramps up. Kenanga was informed by management that the group is also targeting the dairy operation to break even by 2028.

Bloomberg data shows six research houses on F&N’s counter, with four “buy” calls and two “hold” ratings. The 12-month average target price is RM33.36.

AskEdge data shows F&N trading at a price-to-earnings ratio of 25.1 times, which is lower than average where the ratio is applicable but at the higher end compared to recent years’ historical valuation. Its price-to-net-asset-value ratio is 2.6 times lower than most peers and is at its lowest in recent years. 

CIMB maintained its “hold” call with a lower TP of RM29.80, saying earnings should improve gradually in the fourth quarter on stronger sales and tighter cost control. However, it expects the recovery to be limited by ongoing start-up losses from both the dairy farm and the Cambodia facility.

Going against the grain, TA Securities upgraded the stock to “buy” from “hold” despite a lower TP of RM32.80.

“Despite the lower TP, we upgraded F&N to buy from hold, underpinned by expectations of an earnings recovery in FY2027 and a more attractive risk-reward profile following the recent share price weakness,” said TA Securities.  

At Monday's market close, shares of F&N were down by 40 sen or 1.43% to RM27.50. At its last price, the group’s market capitalisation stood at RM10.09 billion. 

Read also:
F&N 3Q net profit rises 10% despite weaker revenue, price hike still on the cards