MIDF Research keeps ‘buy’ rating on F&N
KUALA LUMPUR: Fraser & Neave Holdings Bhd’s (F&N) proposed privatisation of Cocoaland Holdings Bhd is expected to be valueaccretive due to the product diversification and expansion of customer base.
MIDF Research said in a note yesterday F&N would be able to expand into other packaged-food segments and grow its overseas markets.
Cocoaland is engaged in the manufacturing and trading of candies, beverages and other related food items. The deal is synergistic as F&N does not have any products in the snack and sweet segments.
“Nonetheless, we make no changes to our earnings forecasts at this juncture. We estimate that the proposed privatisation will not have a substantial material impact on the gearing ratio of the group.”
MIDF Research has maintained its “buy” call on F&N with a revised target price of RM30.91 from RM30.03 previously.
Key downside risks include unfavourable ringgit to baht translation, increase in raw material prices and supply chain disruptions.
The research firm also noted that Cocoaland’s performance outside Malaysia had been solid, where the group’s first quarter revenue rose 21.5 per cent yearon-year to RM65.74 million.
Its net profit grew 85.4 per cent year-on-year to RM10.55 million due to stronger demand for gummies in Malaysia and increasing snack demand in Saudi Arabia.
F&N has proposed to privatise its 27.66 per cent-owned associate Cocoaland Holdings by buying the remaining shares at RM1.50 each.
The remaining 72.34 per cent represents 325.43 million Cocoaland shares that are not owned by F&N.
The total consideration for the proposed privatisation exercise is RM488.15 million, which will be paid via cash and bank borrowings.