KUCHING: Fraser & Neave Holdings Bhd (F&N) is having a golden start into the year, the research arm of TA Securities Holdings Bhd (TA Research) says, as the group’s first quarter of financial year 2016 (1QFY16) net profit improved significantly by 116.9 per cent year on year (y-o-y) to RM151.7 million.
In a filing on Bursa Malaysia, F&N’s profit before tax for the current quarter ended December 31, 2015 increased substantially by 111.5 per cent from RM81.2 million to RM171.8 million.
According to TA Research, F&N’s 1QFY16 net profit improved significantly by 116.9 per cent y-o-y to RM151.7 million on the back of increased revenue from the food and beverage (F&B) Thailand segment coupled with favorable product mix, lower milk-based commodity globally for its canned milk products, lesser advertising and promotional costs, and gains from foreign exchange.
“Excluding the foreign exchange gains, the core net profit expanded by 43.2 per cent y-o-y to RM100.1 million and beat our full-year expectations and consensus estimates,” it said.
TA Research tweaked its costs assumptions lower to reflect the lower-than-expected commodity prices and operating expenses.
As a result, the research arm’s net financial year 2016/2017/2018 (FY16/17/18) profit estimates were adjusted higher by 5.2 per cent/5.6 per cent/5.7 per cent to RM316.7 million/334.7 million/RM348.9 million respectively.
TA Research believed the weak consumer demand will intensify the pricing competition.
“In addition, advertising and promotions costs are expected to surge during the Europe Cup event this year,” it said.
Nevertheless, the research arm believed new product launches together with cost efficiency measures could help to weather the weak consumer sentiment and absorb the rise in selling costs.
All in, TA Research arrived at a new target price of RM20.16 per share from RM19.98 per share previously based on unchanged 23-fold current year 2016 (CY16) earnings per share.