F&N’S PROFIT FORECASTS REVISED UPWARDS

MIDF Research expects extreme weather to increase demand for beverages

FRASER & Neave Holdings Bhd (F&N) is expected to reap significant benefits from the heatwave in Southeast Asia given its dominant position in the food and beverage (F&B) sector.

MIDF Research said based on the Retail Index Service, F&N is the leading company in Malaysia for ready-to-drink tea, carbonated soft drinks, evaporated milk and sweetened condensed milk.

“We expect that the extreme weather will lead consumers to seek refreshing and convenient options to stay hydrated and cool, thereby increasing the demand for ready-to-go drinks and out-of-home (OOH) beverages,” it said.

F&N is also recognised as the top brand for condensed milk, evaporated milk and sterilised milk in Thailand.

As a result, MIDF Research expects F&N’s revenue for the second and third quarters of the 2024 financial year to experience a surge due to heightened demand for its products.

“This is on the back of the current El Nino weather across the region that is expected to continue until mid-May before the anticipated La Nina (JuneSeptember),” it noted.

MIDF Research adjusted its earnings forecasts for financial years 2024 to 2026 upwards by 5.2, 3.8 and 2.6 per cent, respectively. This was attributed to increased demand for OOH beverages in the first half of calendar year 2024.

The firm expressed optimism regarding F&N’s initiative to introduce an integrated upstream fresh milk venture, with the initial phase targeting the production of 100 million litres of fresh milk in Gemas, Negri Sembilan.

The target price for F&N has been raised to RM37 from RM33.50 previously.

“F&N is poised to benefit from the shift in Malaysian consumer preferences towards local brands, and we appreciate the group’s investment in the integrated dairy farm to enhance self-supply, which can improve cost management and reduce reliance on imported milk,” it said.