F&N GETS 'BUY' CALL WITH PLANS TO VENTURE INTO CAMBODIA

KUALA LUMPUR, May 6 (Bernama) -- MIDF Research has maintained a “buy” call on Fraser & Neave Holdings Bhd (F&N) following plans to expand its manufacturing operations to Cambodia and shift some plant production in Thailand to facilities within Cambodia.

Export sales to Cambodia reached RM200 million per annum and establishing a new manufacturing plant closer to the market is a pragmatic approach to capture the growing demand, and minimise product delivery time, logistical expenses, and supply-related risks, MIDF said in a research note today.

“F&N management also revealed that despite the elevated prices of certain input costs, the normalisation in most raw materials and various price hikes in financial years 2022/2023 has offset the impact.

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“The management also reiterated that it does not foresee any price hikes in the near term and would focus on cost optimisation, with a price hike being considered only as a last resort,” MIDF said.

MIDF has maintained a “buy” on F&N with an unchanged target price (TP) of RM37 on the back of a positive outlook mainly underpinned by a robust out-of-home beverages consumption, a return of leisure and business tourists to Thailand and Malaysia, normalising of certain raw material input costs, and a shift in Malaysian consumer preferences towards local brands.

“We also commend the group's initiative in the integrated dairy farm to improve self-supply (cost savings) and to cater to the underserved fresh milk market with affordable prices in Malaysia.

MIDF said the downside risks for F&N are global supply chain disruption for commodities due to shipping lines avoiding the Suez and Panama Canals, ongoing congestion at major Brazilian ports, climate change in major exporting countries, and volatility in currency rates like the Thai baht and US dollar.

Meanwhile, Kenanga Investment Bank Bhd has maintained a TP of RM38.25 with an outperform call.

“We continue to like F&N for its earnings defensiveness given the stable demand for essential food items despite high inflation and an uncertain global economic outlook, the rising popularity of ready-to-drink products where F&N has a strong presence, and as a proxy to the recovery of domestic consumption and a return of tourists in Thailand,” it said in a note today.

Kenanga highlighted that risks to its call include an uptick in food commodity prices, sustained high inflation affecting consumer spending power and consumers switching to cheaper alternatives.

At 10.49 am, F&N shares rose 50 sen to RM32.50 with 39,900 shares changing hands.

-- BERNAMA