Analysts: F&N Q3 results expected
While its Q3 net profit is within analysts’ expectations, the coming festivities will be a boon
Analysts say Fraser & Neave Holding Bhd’s net profit for the third quarter was within expectations, despite posting a 33.7% year-on-year fall to RM51.63mil.
PETALING JAYA: Analysts said Fraser & Neave Holding Bhd’s (F&N’s) net profit for the third quarter ended June 30 was within expectations, despite posting a 33.7% year-on-year fall to RM51.63mil.
F&N had attributed the fall in net profit to the cessation of its Coca-Cola products business. For the nine-month cumulative period, net profit had fallen 36.8% to RM200.43mil, from RM316.92mil the year before.
AmResearch analyst Low Soo Fang said the net profit for the nine-month cumulative period outperformed the full-year consensus estimate of RM194mil. However, she added it had only accountedfor68% ofAmResearch’s forecast for F&N’s financial yearend on Sept 30.
Meanwhile, Maybank Investment Bank analyst Kang Chun Ee concurred, on anticipation that the fourth quarter will be better. Low said: “Earnings have historically been strongest at the beginning and end of its financial year due to festivities such as the Chinese New Year and Hari Raya Puasa.”
Kang is also positive in view of the potential merger and acquisition (M&A) on the company. F&N announced last Friday that it had accepted the S$5.3bil offer from Heineken NV for its entire 39.7% stake in Asia Pacific Breweries Ltd (APB) and F&N’s 50% share of the non-APB assets in Asia Pacific Investment Pte Ltd.
However, challenger Thai billionaire Charoen Sirivadhanabhakdi, was said to have put in a higher bid to increase its stake in APB.
The rival offer was made via Kindest Place Groups Ltd, which is controlled by Charoen.
Heineken noted yesterday that Kindest Place had made an unsolicited and conditional offer for F&N’s direct 7.3% stake in APB. “The unsolicited offer is not comparable to the Heineken offer,” it said.
Upon completion of the offer, Heineken said it would make a mandatory general offer (MGO) for the remaining shares in APB that it does not own for a total consideration of up to S$2.4bil.
This would mean the aggregate consideration under its offer and the MGO would be up to S$7.7bil.
In contrast, the total consideration to F&N under Kindest Place’s unsolicited offer would only be S$1bil.
“If the M&A courtship does not materialise, the soft drinks division will be left to cope with life after Coca-Cola.
“The lower scale of the soft drinks division would also mean lower margins,” said CIMB Research analyst Foong Wai Mun.
Meanwhile, the head of a local bank-backed research house said F&N had initiated efforts to grow its other brands. “On the beverages side, 100 Plus has been doing well,” he said.
In filings with Bursa Malaysia, F&N recently said its soft drinks division had taken several actions.
Kang added that the company’s dairy division from Thailand had resumed up to 85% of its pre-flood production levels by end of April. Dairy Thailand’s revenue rose 18% year-on-year to RM296mil on the back of pent-up demand from Thai consumers.
Although the division had returned to the black in the third quarter after two quarters of losses, analysts expect the fourth quarter to perform better from continuous demand for dairy products in Thailand and Indochina.
Dairy Malaysia grew 9% yearon-year in revenue but contracted in year-on-year net profit due to shifting expenses and accelerated depreciation totalling RM9.2mil.
Low said F&N’s long-term earnings growth remained intact, underpinned by higher demand for core soft drinks and dairies divisions.
F&N shares fell 44 sen to RM19.90, with a volume of 100,000 shares yesterday. The head of a local bank-backed research house said: “Some shareholders are probably taking profit. The volume was not high as well, which causes no concern to us.”