Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: MAYBANK
Fraser & Neave Holdings Bhd
(May 7, RM10.74)
Maintain buy at RM10.72 with target price of RM13.25: F&N thrashed consensus expectations in recording solid growth in all three core F&B divisions. Despite this, its CEO Tan Ang Meng is retiring early even as F&N readies for life after Coca-Cola in 18 months' time. We remain believers in F&N and though we are placing our forecasts under review pending an analysts' briefing last Friday, we maintain our buy call and RM13.25 target price.
RM85 million 2QFY10 net profit (+60% year-on-year; +10% quarter-on-quarter) was significantly beyond our and consensus expectations, coming in at 32.6% of our and 31.2% of market forecasts. This brought 1HFY10 recurring net profit to a record high RM163 million (+46% y-o-y) or 62.3% and 59.7% of our and consensus full-year forecasts.
Revenue from the soft drinks and glass divisions grew 19% and 14% y-o-y respectively as F&N posted RM1 billion in revenue (+10% y-o-y). In recurring operating profit terms, the dairies and soft drinks divisions were the stand-outs, growing by 31% and 18% as F&N benefited from higher festive sales volumes and lower raw material prices respectively to post a group-level 21% y-o-y growth to RM110 million in 2QFY10. Dairies further contributed to the outstanding 2QFY10 performance as its plant investment in Thailand lowered F&N's 2QFY10 effective tax rate to 19.4% (-4.1 percentage points y-o-y).
F&N declared interim dividends of 18 sen per share gross (less 25% tax) and three sen tax-exempt. This was 69% of 2QFY10's net profit and puts F&N on track to pay out at least 58.7 sen per share (gross) for the full year or another 27.5 sen per share in net dividends. F&N is thus maintaining its payout of at least 60% of net earnings annually in spite of its stellar growth.
We continue to like F&N for its ability to translate business growth in both soft drinks and dairies domestically and overseas into consistently strong earnings and dividend growth at group level. Our RM13.25 target price is based on 17 times CY11 PER, which is the high end of its average trading valuations over the last three years. - Maybank IB, May 7
This article appeared in The Edge Financial Daily, May 10, 2010.
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: MAYBANK
Fraser & Neave Holdings Bhd
(May 7, RM10.74)
Maintain buy at RM10.72 with target price of RM13.25: F&N thrashed consensus expectations in recording solid growth in all three core F&B divisions. Despite this, its CEO Tan Ang Meng is retiring early even as F&N readies for life after Coca-Cola in 18 months' time. We remain believers in F&N and though we are placing our forecasts under review pending an analysts' briefing last Friday, we maintain our buy call and RM13.25 target price.
RM85 million 2QFY10 net profit (+60% year-on-year; +10% quarter-on-quarter) was significantly beyond our and consensus expectations, coming in at 32.6% of our and 31.2% of market forecasts. This brought 1HFY10 recurring net profit to a record high RM163 million (+46% y-o-y) or 62.3% and 59.7% of our and consensus full-year forecasts.
Revenue from the soft drinks and glass divisions grew 19% and 14% y-o-y respectively as F&N posted RM1 billion in revenue (+10% y-o-y). In recurring operating profit terms, the dairies and soft drinks divisions were the stand-outs, growing by 31% and 18% as F&N benefited from higher festive sales volumes and lower raw material prices respectively to post a group-level 21% y-o-y growth to RM110 million in 2QFY10. Dairies further contributed to the outstanding 2QFY10 performance as its plant investment in Thailand lowered F&N's 2QFY10 effective tax rate to 19.4% (-4.1 percentage points y-o-y).
F&N declared interim dividends of 18 sen per share gross (less 25% tax) and three sen tax-exempt. This was 69% of 2QFY10's net profit and puts F&N on track to pay out at least 58.7 sen per share (gross) for the full year or another 27.5 sen per share in net dividends. F&N is thus maintaining its payout of at least 60% of net earnings annually in spite of its stellar growth.
We continue to like F&N for its ability to translate business growth in both soft drinks and dairies domestically and overseas into consistently strong earnings and dividend growth at group level. Our RM13.25 target price is based on 17 times CY11 PER, which is the high end of its average trading valuations over the last three years. - Maybank IB, May 7
This article appeared in The Edge Financial Daily, May 10, 2010.
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