F&N (3689) : More upside for Fraser & Neave, says CIMB Research
KUALA LUMPUR: CIMB Equities Research has recommended investors accumulate shares of Fraser & Neave Holdings (F&NH) as there could be upside potential to its earnings forecast if raw material prices decline further.
It said on Monday F&NH is trading at 20 timed to 21 times FY15 to FY16 price-to-earnings (P/E) “which we think is attractive given its strong brand name and leadership position in the industry”
CIMB Research said during last week’s analysts briefing, F&NH management said the company would continue to defend and increase its market share by increasing its distribution network and improve its product mix, as well as introduce more new products.
“We maintain our FY15-17 earnings forecasts and discounted cashflow based target price (RM24.52). We also 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,” it said.
CIMB Research said F&NH, despite having large market shares in both Malaysia and Thailand, and being in a competitive industry, sales volume growth remains strong.
It said there was a better product mix, effective marketing efforts and lower trade discounts, as well as lower raw material cost helped to boost margins.
More product cross-selling is expected to be seen next year and phase 1 of Fraser Square will be launched within the next six months, with earnings contributions expected in three to four years
“We concur with management’s view that volume growth in all markets have been impressive, especially in light of the competitive market landscape and its current large market share.
“In 2015, while the operating environment will be challenging given the higher living costs (due to the implementation of Goods and Services Tax and subsidy cuts), we believe F&NH could still deliver encouraging results driven by the launch of new products and lower raw material costs.
“The higher operating efficiency of its new Pulau Indah plant could also help to improve margins. Although the company is likely to pass on the 6% GST to end- consumers, hence raising the selling prices of its products, we do not think this would pose a substantial risk to its market share given that most of its competitors will do likewise,” said CIMB Research.
http://www.thestar.com.my
KUALA LUMPUR: CIMB Equities Research has recommended investors accumulate shares of Fraser & Neave Holdings (F&NH) as there could be upside potential to its earnings forecast if raw material prices decline further.
It said on Monday F&NH is trading at 20 timed to 21 times FY15 to FY16 price-to-earnings (P/E) “which we think is attractive given its strong brand name and leadership position in the industry”
CIMB Research said during last week’s analysts briefing, F&NH management said the company would continue to defend and increase its market share by increasing its distribution network and improve its product mix, as well as introduce more new products.
“We maintain our FY15-17 earnings forecasts and discounted cashflow based target price (RM24.52). We also 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,” it said.
CIMB Research said F&NH, despite having large market shares in both Malaysia and Thailand, and being in a competitive industry, sales volume growth remains strong.
It said there was a better product mix, effective marketing efforts and lower trade discounts, as well as lower raw material cost helped to boost margins.
More product cross-selling is expected to be seen next year and phase 1 of Fraser Square will be launched within the next six months, with earnings contributions expected in three to four years
“We concur with management’s view that volume growth in all markets have been impressive, especially in light of the competitive market landscape and its current large market share.
“In 2015, while the operating environment will be challenging given the higher living costs (due to the implementation of Goods and Services Tax and subsidy cuts), we believe F&NH could still deliver encouraging results driven by the launch of new products and lower raw material costs.
“The higher operating efficiency of its new Pulau Indah plant could also help to improve margins. Although the company is likely to pass on the 6% GST to end- consumers, hence raising the selling prices of its products, we do not think this would pose a substantial risk to its market share given that most of its competitors will do likewise,” said CIMB Research.
http://www.thestar.com.my
