KUALA LUMPUR: Off the back of heightened demand due to the festive period, Fraser & Neave Holdings Bhd ‘s (F&N) outperformance in the opening months of 2024 could also be pointing towards a rising preference for Asian brands, said Kenanga Research.
In a results note, the research firm said it believed consumers may be opting for Asian brands over Western ones, while the return of tourists to Malaysia and Thailand will continue to boost domestic and export sales respectively.
“We also like its focus on the high-growth Halal packaged food and dairy products while the streamlining of the manufacturing facilities of Sri Nona and Cocoaland should boost efficiency and hence the bottom line,” it said.
In its recent results, F&N’s 1QFY24 core net profit jumped 62% year-on-year on a favourable product mix, lower input cost and enhanced efficiency.
“F&N’s 1HFY24 core net profit of RM332mil beat expectations, coming in at 61% each of both our full-year forecast and the full-year consensus estimate,” said Kenanga.
F&N declared a dividend of 30 sen, putting in track to beat Kenanga’s full-year forecast of 77 sen.
Kenanga raised its FY24 and FY25 net profit projections by 12% and 13% respectively, after raising its assumptions on sales and margins, and increased both years’ dividend forecasts by 10% each to 85 sen and 87 sen.
The research firm reiterated “outperform” on the stock and raised its target price by 13% to RM38.25 from RM33.80.
Meanwhile, TA Securities Research said F&N’s successful first-quarter performance was owing to the elevated festive demand. Moving into 2HFY24, the research firm said it anticipates a softening in demand due to the absence of festive sales.
However, it expects management to be able to cushion the impact of rising input costs for certain commodities (cocoa powder, rice, sugar, and gelatine) through its cost optimisation strategy while offsetting the increase with raw materials that have decreased their peak (palm oil and skim milk
powder).
“We put our ‘hold’ recommendation and target price of RM30/share under review pending more insights from an analyst briefing scheduled on May 3,” said TA Securities.
At 9.33am, shares in F&N were trading 16 sen or 0.51% higher at RM31.76 on the back of 4,200 units changing hands.