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MIDF Research revised its target price for F&N to RM31.59 from RM33.78 previously with an unchanged “neutral” call.

KUALA LUMPUR: Fraser & Neave Holdings Bhd’s (F&N) target price has been downgraded after its earnings for financial year 2019 came in lower than analysts’ expectation.

MIDF Research revised its target price for F&N to RM31.59 from RM33.78 previously with an unchanged “neutral” call.

This was also in view of competitive price pressures and intensifying competition especially in the canned milk and beverage segment in Malaysia, the firm said.

MIDF Research however said the group’s earnings will continue to grow, driven by the better prospect for F&B Thailand following the improvement in both sweetened condensed and evaporated milk segments.

It said the segment has plenty of room for advancement given the huge market and continued investment in brand and trade spending for new products will solidify its brand presence.

F&N’s normalised earnings of RM406.2 million for financial year 2019, was lower than the consensus expectation, accounting for 94.1 per cent of forecasts.

“Contrary to our expectation, F&B Thailand segment reported a decline in operating profit during the quarter driven by intense competition in the sterilised milk segment,” MIDF Research said.

The firm added that F&B Malaysia segment reported a subdued performance mainly due to a wait-and-see stance by retailers following the pre-loading of products in the previous quarter ahead sugar tax implementation on the July 2019.

Other reasons included expenses related to employee separation benefits and equipment written off and absence of sales tax refund received in the corresponding quarter last year.

F&B Thailand also recorded lower sales in local currency term due to higher competition in the sterilised milk products.

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