KUALA LUMPUR: Kenanga Research has tapered its earnings estimate on Fraser & Neave Holdings Bhd amid the resurgence of Covid-19 cases and higher commodity price trends but it expects the group to weather the uncertain times.
The research house, which has a "market perform" on the stock, said it expects FY21 core net profit to lower than than initially expected despite the first quarter result coming within expectations at 31% of its and consensus full-year estimates.
"Moving forward, qualms surrounding the resurgence of Covid-19 globally as well as the higher commodity price trends are likely to continue to temper with the anticipated earnings recovery," it said.
However, Kenanga also expects the group to weather through the uncertain times due to resilient in-home consumption demand and robust export sales of RM796mil in FY20, which was in line with the group's pre-pandemic target, as well as a sturdy balance sheet.
It added that the group's recent acquisition of Sri Nona companies would aid in complementing its halal food portfolio and should present itself as a new pillar of growth in the longer term.
Kenanga reduced FY21 and FY22 forecast earnings by 5% each on expected weaker sales amid the high number of Covid-19 cases in both Malaysia and Thailand
In tandem, its target price was cut to RM32.55 from RM33.80 previously based on a rolled forward FY22 price-earnings ratio of 28x, which is closely in line with the stock's three-year mean.
"While the group’s sturdy fundamentals and resiliency as one of few large-cap F&B stocks could provide some degree of comfort under the current market uncertainty, the stock appears to be fairly valued at this juncture, in our view," it said.
It also expects dividend to be a slight dampener with the anticipated low yield of about 2%.