CGS-CIMB REITERATES 'HOLD' CALL ON F&N, TP AT RM31.60

KUALA LUMPUR, May 6 -- CGS-CIMB has reiterated its “hold” call on Fraser & Neave Holdings Bhd (F&N) with a discounted cash flow (DCF)-based target price (TP) of RM31.60 or 6.2 per cent weighted average cost of capital (WACC).

In a note today, the research house said key upside or downside risks involving stronger-than-expected decrease and increase in raw material prices.

“We find F&N fairly valued at current valuations as we do not see any short-term re-rating catalysts,” it said. 

“We estimated export sales formed 21 per cent of the group’s total first half financial year 2021 (1HFY21) revenue,” it said.

CGS-CIMB said F&N also expects great things from its acquisition of Sri Nona companies to spearhead its expansion into the halal food category. 

However, the research house said F&N remains cautious on the recent uptrend in commodity prices, which are expected to rise further going forward.

“F&N shared that it is able to mitigate this impact, given its active hedging policies in place.

“F&N is not discounting the possibility of raising selling prices of selected products to pass on the higher commodity prices,” it added.

Nevertheless, the research house believes that any price increase will likely be limited to a single digit quantum, as F&N would need to keep its products affordable for the mass market.

Meanwhile, MIDF Research has upgraded to a “trading buy” call on F&N with an unchanged TP of RM32.63.

“Due to the correction in its share price, the capital upside for the stock is looking more attractive,” it said.

“We upgrade the stock to trading buy (previously neutral), premised on its promising outlook, underpinned by the recovery in consumption, new product launch and ability to manage rising costs,” it said. 

-- BERNAMA