F&N outlook bright


According to TA Research, F&N's ability to weather through near-term headwinds is relatively unscathed.

PETALING JAYA: Fraser & Neave Holdings Bhd’s (F&N) continuous drive for greater economies and scale, cutting-edge capabilities and improved operational efficiency will provide the group pricing flexibility and differentiating product features, which will lead to a strong and sustainable business for the future.

According to TA Research, the group’s ability to weather through near-term headwinds is relatively unscathed.

“This is underpinned by its diverse geographical operations, robust financial muscles with net cash position, strong export sales momentum, healthier and better value product offerings along with its pursuit to improve processes and capacities, ” said TA Research in a report following F&N’s virtual analyst briefing.

The research house highlighted that F&N’s financial year 2020’s (FY20) performance remained largely resilient despite the Covid-19 pandemic, as the group’s core competence in its diverse geographical operations has helped to reduce earnings volatility.

MIDF Research concurred, noting that the group’s geographical diversification will be beneficial as sales can be cushioned by other markets in case there is softening in its main markets, namely, Malaysia and Thailand.

For instance, F&N’s exports to the IndoChina market has lifted sales for Thailand F&B.

F&N’s sturdier F&B Thailand registered 5.3% year-on-year (y-o-y) operating earnings growth in FY20, partly mitigating earnings weakness of F&B Malaysia, which dipped 10% y-o-y.

Looking forward, although there is political unrest in Bangkok currently, coupled with the emergency decree declared for the period of Oct 14 to 22,2020, which may induce some concerns over Thailand’s economic activities, TA Research opined that the impact would be marginal to F&N, given that its products are mainly food ingredients where demand is resilient.

More importantly, F&N’s production facilities in Thailand are not damaged or disrupted in the political unrest.

“As for the balance sheet, the group is in a strong net cash position of an estimated RM400mil, with a low gross gearing ratio of 3.4% and a comfortable current ratio of 2.4 times.

“We reckon the robust balance sheet would enable F&N to weather through near-term headwinds or even capitalise on opportunities should one arise, ” said TA Research.

Overall, MIDF Research believes that F&N is likely to see recovery into 2021.

“However, we take note of the subdued consumer sentiment and possibly weaker festivity mood in the near term, which may dampen sales, ” the research house said.

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