MBSB Lifts F&N to Buy Despite 27% Core Profit Slump, Citing Attractive Valuation
StockTipRatings ·
MBSB Investment Bank’s research team upgraded Fraser & Neave Holdings to “Buy” from “Neutral”, despite lowering its target price to RM23.28 from RM25.71. This implies 4.7% or an estimated 12.5% total return, including a 2.8% dividend yield. The team believes recent share-price weakness has made the potential returns more attractive, even as near-term earnings recovery remains slow.
Its valuation applies 20 times projected FY27 earnings, below F&N’s ten-year historical average of approximately 22 times.
The company's FY26 core net profit fell 26.5% to RM378.9 million, broadly meeting the team’s expectations. Fourth-quarter core net profit declined 47.9% year-on-year to RM62.4 million, weighed down by AgriValley operating costs, Cambodia plant start-up expenses and weaker Indochina profitability.
Looking ahead, MBSB cut FY27 and FY28 earnings forecasts by 9% and 3%, respectively, to reflect a slower recovery and continuing start-up costs. Nevertheless, domestic beverage, water and dairy demand, wider distribution and growing fresh-milk contributions should support Malaysian operations. Cambodia’s local production should gradually improve its cost base as utilisation increases, although initial expenses remain a drag.
The team forecasts core net profit to recover to RM427.6 million in FY27 and RM640.9 million in FY28.
As of 12:35 p.m. on November 6, Fraser & Neave Holdings’ share price rose 4.8% to RM22.24.
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