MBSB Research said it was taking a “balanced” view on F&N’s outlook.
PETALING JAYA: Malaysia remains the earnings anchor for Fraser & Neave (F&N) Holdings Bhd and it continues to provide stability, while Indochina is still the drag and the biggest swing factor for any meaningful earnings recovery.
MBSB Research said it was taking a “balanced” view on F&N’s outlook, noting that while the group has solid fundamentals and a diversified operating base, near-term performance remains influenced by regional and currency-related headwinds.
“F&N began FY26 on a softer footing, with earnings pressured by weaker Indochina contributions and unfavourable foreign exchange (forex) movements, partly offset by cost efficiency gains, easing input prices and stable operations in Malaysia,” it noted.
F&B Malaysia is expected to provide stability, supported by steady domestic demand, export momentum and the normalisation of festive sell-in activities in 2Q26.
“Conditions in F&B Indochina should gradually stabilise as economic activity improves and trade channels normalise, with the new dairy manufacturing facility in Cambodia expected to support supply continuity from FY26 onwards,” the research house added.
Kenanga Research said near-term performance should be anchored by resilient momentum in F&B Malaysia, which should help cushion ongoing softness in Indochina as conditions normalise and supply continuity improves going into FY26.
The research house pointed out that F&B’s 1Q26 results came in below expectations, stating that core net profit, adjusted for forex, of RM112mil came in at only 21% of both its full-year forecast and the street’s estimate.
It said the disappointment was more significant because the first quarter is typically stronger due to seasonal factors.
“The key variance against our forecast came largely from weaker-than-expected performance in F&B Indochina, and higher-than-expected taxes,” the research house explained.
MBSB Research said group profitability was pressured by forex and tax effects, driven by unfavourable forex movements and a higher effective tax burden.
Kenanga Research highlighted that the group saw a higher effective tax rate (up 6.9 percentage points year-on-year) due to unrecognised deferred tax assets related to dairy farm losses and higher foreign withholding tax.
On ratings, MBSB Research upgraded F&N to “neutral” with an unchanged target price (TP) of RM32.08 after a pullback, stating valuation had become more balanced.
Kenanga Research maintained its “outperform” call on the stock but cut its TP to RM37.70 and reduced FY26 earnings by 6% to reflect weaker Indochina performance.
Looking ahead, both houses see 2Q26 support from festive demand, Visit Malaysia 2026-driven out-of-home consumption, and gradual Indochina stabilisation as trade normalises and Cambodia dairy capacity improves supply continuity.
“We continue to like F&N for its defensive earnings given the stable demand for essential food and beverage items despite high inflation and an uncertain global economic outlook,” Kenanga said.
The research house also liked F&N due to the rising popularity of ready-to-drink products where it has a strong presence, and its long-term growth prospects driven by its investment in a sizeable dairy farm in Gemas, Negri Sembilan.
An analyst told StarBiz that productivity at the F&N AgriValley integrated dairy farm, with more than 6,000 cattle.
He added that productivity is expected to pick up following the start of commercial operations at the on-site dairy plant last month.
