Fraser & Neave Holdings Bhd (F&N) beats market 21% year-on-year (YoY) rise in FY23 core net profit, leading to surprise 17 sen special dividend, according to Kenanga Research.
“F&N’s FY23 results met our forecast but beat market expectation. Its FY23 core net profit rose 21% YoY driven by increased sales and improved margins, leading to a surprise special dividend.
“The group plans to navigate market volatility with focused brand and engagement strategies,” it said in its Results Note today.
Kenanga maintains its OUTPERFORM call and fine-tunes its FY24 net profit estimates up by 3% and lifts its TP by 3% to RM29.40 from RM28.45 previously, with no adjustment to its TP based on 3-star ESG rating.
This is based on unchanged FY24F targeted PER of 22 times, consistent with the industry’s average forward PER, after raising its EBIT margin assumption, and introduce its FY25 numbers.
Elaborating further, the research house said F&N’s FY23 core net profit of RM485 million (excluding RM51 million gains mainly comprising fair value gain on Cocoaland’s privatisation) met its forecast but beat the consensus estimate by 6%.
A total dividend of 50 sen declared comprising a surprise 17.0 sen special dividend plus a 33.0 sen final dividend, which Kenanga said exceed its forecast of 33 sen.
“Year-on-year, F&N’s top line grew 12% with strong showing from both Malaysia, up by 18% and Thailand, up by 5%. Its sales in Malaysia were fuelled by festive demand, increased out-of-home dining, an expanded product range and Cocoaland’s full integration.
“Its core EBIT (excluding one-off nonoperating items) rose by 27% to RM592m. However, QoQ, its top line dipped by 7% due to festive phasing in the previous quarter.
“Correspondingly, its core EBIT fell by 5% to RM159m due to lower revenue, rising sugar prices and net unfavourable forex impact from USD,” it said.
Kenanga is in the view that F&N’s earnings prospects remain positive, supported by the normalisation of economic activities and consumption patterns, the return of international tourists to Malaysia and Thailand coupled with a rebound in export sales.
“Moving forward, we understand that the group is set to continue navigate market volatility by leveraging its diverse brand portfolio, employing strategic route-to-market initiatives, executing in-store strategies, and maintaining consistent brand building and customer engagement.
Risks to Kenanga’s call include an uptick in food commodities prices, sustained high inflation eating into consumer spending power and downtrading by consumers, such as switching to cheaper alternatives.
