F&N to see year-end boost from vaccination rate

KUALA LUMPUR: On the back of strong earnings results in its latest quarter, Fraser & Neave Holdings Bhd (F&N) is displaying resilience during the pandemic and is expected to record stronger earnings moving into the year-end.

According to Kenanga Research, the beverage maker's 9MFY21 results were above expectations at 80% and 78% of its and consensus full-year estimates, considering the prevailing restrictions as compared to the previous corresponding period.

As the vaccination rate in Malaysia grows and herd immunity is targeted for December, F&N's earnings are expected to receive a boost in the months ahead.

"Premised on the ease of restrictions coupled with year-end activities

and pent-up demand, we see robust and sustained earnings ahead," said Kenanga.

The research house added that the group's investments in Sri Nona proved worthwhile in the recent festive season and provides a platform for growth in the halal food segments as well as halal exports in the Mena and Asean regions.

Kenanga said F&N's hedging activities have kept gross profit margins at a reasonable level of 29%, which is two percentage points below its pre-pandemic level, despite the ongoing volatility in commodity prices.

"We further take comfort in its net cash of RM580m implying further capex ahead will be funded through internally generated earnings, hence funding cost will be negligible," it said.

Kenanga maintained its target price of RM33.15 on a FY22 price-earnings of 28.5x, which is close to its five-year mean, given the robust earnings.

The research house recommended investors to buy on weakness as the share price is at a five-year low, and is likely to have bottomed out given the ramp up in the vaccination rate.
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