Fraser & Neave Holdings - Performing in line
Target RM24.52 (Stock Rating: ADD)
At 104% of full-year forecast, F&N’s FY14 core net profit was in line with both our and consensus's expectations. FY14 topline growth was across the board, while core bottomline growth was driven by the soft drinks and dairies Malaysia segments. Despite the in-line results, we raise our FY15-17 EPS forecasts by 2% to factor in the lower raw material prices. Our DCF-based target price rises as we roll it over to FY15. We maintain our Add call on the stock, with more product cross-selling and the recovery of margins in Thailand as the potential re-rating catalysts. The final single-tier dividend of 33 sen takes YTD DPS to 55 sen, which is lower than our forecast.
Stronger full-year results
F&N reported a good set of results. Despite the continued competitive pressure, it chalked up FY14 revenue growth of 8.9% yoy, with core net profit rising 23.9% yoy. Sales were higher for all business units (soft drinks +4.5% yoy; dairies Malaysia, DM, +7.9% yoy; and dairies Thailand, DT, +15.6% yoy) due to better sales volume and product mix – as a result of increased market distribution points, effective product penetration and promotion campaigns. Soft drinks sales volume in Malaysia and export markets improved by 3.5% and 22.7%, respectively, driven by the 100Plus and Seasons range. Domestic dairy volume grew by 10.3% on increased market penetration and higher presence in “on premise”. Thailand volume increased 16.4%, driven by double-digit growth in both sweetened beverage creamer and evaporated milk products. Aside from the strong domestic volume, Indochina and other exports also improved by 28.2% yoy. Though DT recorded strong topline growth, its EBIT dropped 39.2% yoy. Fortunately, this was offset by impressive EBIT growth for soft drinks (+26.2% yoy) and DM (+28.3% yoy), fuelled by a better product mix, lower trade discount, favourable raw material prices and improved new plant efficiencies. DT was impacted by higher milk costs as the relevant authorities in Thailand did not approve F&N’s proposal to increase selling prices.
Qoq performance improved
4Q revenue inched up 0.7% but core net profit rose 9.6% qoq. While soft drinks sales weakened, operating profit rose 50.5% due to an improved product mix and cost savings (that offset the lower profit from DM as a result of poorer sales and higher commodity prices). DT also registered stronger operating profit (+7.2%) on higher sales and effective sales-mix management.
Source: CIMB Daybreak - 07 November 2014
Target RM24.52 (Stock Rating: ADD)
At 104% of full-year forecast, F&N’s FY14 core net profit was in line with both our and consensus's expectations. FY14 topline growth was across the board, while core bottomline growth was driven by the soft drinks and dairies Malaysia segments. Despite the in-line results, we raise our FY15-17 EPS forecasts by 2% to factor in the lower raw material prices. Our DCF-based target price rises as we roll it over to FY15. We maintain our Add call on the stock, with more product cross-selling and the recovery of margins in Thailand as the potential re-rating catalysts. The final single-tier dividend of 33 sen takes YTD DPS to 55 sen, which is lower than our forecast.
Stronger full-year results
F&N reported a good set of results. Despite the continued competitive pressure, it chalked up FY14 revenue growth of 8.9% yoy, with core net profit rising 23.9% yoy. Sales were higher for all business units (soft drinks +4.5% yoy; dairies Malaysia, DM, +7.9% yoy; and dairies Thailand, DT, +15.6% yoy) due to better sales volume and product mix – as a result of increased market distribution points, effective product penetration and promotion campaigns. Soft drinks sales volume in Malaysia and export markets improved by 3.5% and 22.7%, respectively, driven by the 100Plus and Seasons range. Domestic dairy volume grew by 10.3% on increased market penetration and higher presence in “on premise”. Thailand volume increased 16.4%, driven by double-digit growth in both sweetened beverage creamer and evaporated milk products. Aside from the strong domestic volume, Indochina and other exports also improved by 28.2% yoy. Though DT recorded strong topline growth, its EBIT dropped 39.2% yoy. Fortunately, this was offset by impressive EBIT growth for soft drinks (+26.2% yoy) and DM (+28.3% yoy), fuelled by a better product mix, lower trade discount, favourable raw material prices and improved new plant efficiencies. DT was impacted by higher milk costs as the relevant authorities in Thailand did not approve F&N’s proposal to increase selling prices.
Qoq performance improved
4Q revenue inched up 0.7% but core net profit rose 9.6% qoq. While soft drinks sales weakened, operating profit rose 50.5% due to an improved product mix and cost savings (that offset the lower profit from DM as a result of poorer sales and higher commodity prices). DT also registered stronger operating profit (+7.2%) on higher sales and effective sales-mix management.
Source: CIMB Daybreak - 07 November 2014
