In its assessment report, Maybank IB views positively over Frasers and Neave Holdings via its wholly-owned subsidiary – F&N Foods (Cambodia) Co Ltd lease agreement with Suvannaphum Investment Co Ltd for the lease of a parcel of 7.954 acres of industrial land at Suvannaphum Special Economic Zone.
The house is positive about this development as F&N continues to strengthen its business by expanding manufacturing operations in Cambodia. The lease of the industrial land is to build a manufacturing facility for dairy products, particularly sweetened beverage reamers in cans and pouches. Note that the group currently only has operations in Malaysia and Thailand. Additionally, Maybank appreciates the strategy of establishing a new manufacturing plant closer to the market to reduce product delivery time and logistics costs. Note that the Teaport brand is the No. 1 condensed milk brand within Cambodia, and the product is exported from Thailand operations to Cambodia.
Maybank said it also likes the strategic location of the land situated within the Suvannaphum Special Economic Zone, which offers convenient access to distribution warehouses, dry ports, and bonded warehouses. The setup cost for the
production facility is estimated at RM179.5m (USD37.5m), covering expenses such as land leasing, construction of buildings, and machinery procurement. The plant is expected to commence operations in 1QCY26.
This is expected to minimize the non-renewal of the lease of industrial land. Note that the lessor is under the control of YBhg. Tan Sri Charoen Sirivadhanabhakdi and the estate of the late YBhg. Puan Sri Wanna Sirivadhanabhakdi, both significant shareholders of F&NHB. Meanwhile, the lessor primarily focuses on developing the Suvannaphum Special Economic Zone, Suvannaphum Dry Port, Customs services, transportation and logistics services, river port services, and warehouses for rent.
F&N intends to finance the lease consideration of the vacant industrial land through internally generated funds. Post-completion of the lease consideration, the house expects the group to maintain its net cash position with a slight decline in FY24F net cash to market cap, from 3.5% to 3.3%. On the other hand, it also anticipates minimal impact on the balance sheet of the setup cost of the new production plant if funded internally.
Maintain BUY with an unchanged TP of RM33.50. Maybank says it makes no changes to our earnings forecast at this juncture
pending further details of the production plan. The house is optimistic about the company’s prospects, underpinned by robust OOH beverages consumption, anticipated increase in leisure and business tourists, fueled by visa-free exemptions from both Thailand and Malaysia, potentially boosting domestic sales, lower input costs, thanks to normalized commodity prices and the recent decline in sugar prices, gains from the shift in Malaysian consumer preferences towards local brands,
particularly in dairy and food (with a focus on halal food) products
