F&N projects more stable margins

PETALING JAYA: Fraser & Neave Holdings Bhd (F&N) expects more stable margins going forward, as prices of most soft commodities ease although those of tinplate/cans, milk and palm oil could stay elevated into 2023.

Nonetheless, the higher cost of tinplate/cans can be mitigated by switching to certain more sustainable packaging such as PET and Tetra.

Kenanga Research said F&N is also forging ahead with its investment of Rm700mil to Rm800mil in an integrated dairy farm with an initial capacity of 5,000 cattle for self-sufficiency ratio for fresh milk.

It said the reopening of the economy and readjustment in prices have contributed to a robust topline of about Rm600mil in the last three quarters for the Malaysian operations.

This was the first full-year contribution of its food segment and offset by lower export revenue coming from Greater China.

The company is confident that the top line will be about Rm600mil in the coming quarters.

However, it revised downwards its financial year 2023 (FY23) and FY24 earnings by 3% and 5%, respectively, on account of higher depreciation cost due to the FY23 capital expenditure (capex) of Rm700mil.

It lowered its target price (TP) by 3% to RM26.11 on an unchanged FY23 price-earnings ratio (PER) of 22 times, which is consistent with the industry’s average forward PER.

Meanwhile, TA Research trimmed its FY23, FY24 and FY25 earnings forecast by 7.%, 7.5% and 6.5%, respectively, after factoring in the acquisition of Cocoaland Holdings Bhd, as well as the capital and operating expenditures for the group’s venture into new categories.

TA Research said F&N’S purchase of Sri Nona Companies in 2021 allowed the group to venture into the halal food industry and offer a wider product portfolio.