F&N (3689) - Fraser & Neave Holdings - Good Dairies Malaysia results
Target RM24.52 (Stock Rating: ADD)
F&N’s 1QFY9/15 results were in line with our forecasts (26.7% of full-year earnings) and consensus’ estimates (25.8%). Its financial 1Q is typically stronger due to yearend festivities. Revenue expanded 9.3% yoy on the back of stronger sales volume while core net profit increased 9.6%, mainly driven by a lower effective tax rate. Given the in-line results, we maintain our earnings forecasts and DCF-based target price, and keep our Add rating on the stock. Potential re-rating catalysts are more products cross-selling, and the recovery of margins in Thailand.
Stronger 1QFY15 profit driven by lower effective tax rate
F&N’s 1QFY15 revenue increased 9.3% yoy, driven by all segments – soft drinks (+0.5% yoy), Dairies Malaysia (+9.4% yoy), and Dairies Thailand (+20.6% yoy). Growth in its soft drinks segment was marginal due to the later commencement of festival trade activities for Chinese New Year and loss of sales as a result of the East Coast floods. The strong growth from Dairies Malaysia was driven by the stronger sales volume of sweetened condensed milk and evaporated milk, both in the domestic and overseas markets. Meanwhile, the strong growth in Dairies Thailand was due to the higher level of promotional activities and the depreciation of the Ringgit against the Thai Baht. Despite the stronger revenue, F&N’s EBIT only rose by 0.3% yoy, impacted by: 1) lower economies of scale in its soft drinks segment due to weaker sales volume and higher operating cost (logistics, warehousing and staff), and 2) higher A&P expenses incurred by Dairies Thailand. These offset the better margin from Dairies Malaysia on the back of higher sales volume and cost savings. However, core net profit (excludes one-off receivables and cooler impairment charges of RM4.1m due to the floods in East Coast) saw similar growth as the topline, at 9.6% yoy, thanks to the lower effective tax rate of 13.9% versus 20.2% last year.
Better qoq due to better performance from Dairies Malaysia
On a qoq basis, revenue increased 7.4% while core net profit rose 11.8%. The stronger topline was driven by better sales from Dairies Malaysia (+19.9% yoy) and Thailand (+9.8% yoy), which offset the weaker soft drinks revenue (-2.5% yoy). The better bottomline was due to the higher margin reported by Dairies Malaysia on the back of higher sales volume, cost savings and lower commodity prices from milk and palm oil, which offset the weaker margin in the soft drinks segment.
Source: CIMB Daybreak - 11 February 2015
Target RM24.52 (Stock Rating: ADD)
F&N’s 1QFY9/15 results were in line with our forecasts (26.7% of full-year earnings) and consensus’ estimates (25.8%). Its financial 1Q is typically stronger due to yearend festivities. Revenue expanded 9.3% yoy on the back of stronger sales volume while core net profit increased 9.6%, mainly driven by a lower effective tax rate. Given the in-line results, we maintain our earnings forecasts and DCF-based target price, and keep our Add rating on the stock. Potential re-rating catalysts are more products cross-selling, and the recovery of margins in Thailand.
Stronger 1QFY15 profit driven by lower effective tax rate
F&N’s 1QFY15 revenue increased 9.3% yoy, driven by all segments – soft drinks (+0.5% yoy), Dairies Malaysia (+9.4% yoy), and Dairies Thailand (+20.6% yoy). Growth in its soft drinks segment was marginal due to the later commencement of festival trade activities for Chinese New Year and loss of sales as a result of the East Coast floods. The strong growth from Dairies Malaysia was driven by the stronger sales volume of sweetened condensed milk and evaporated milk, both in the domestic and overseas markets. Meanwhile, the strong growth in Dairies Thailand was due to the higher level of promotional activities and the depreciation of the Ringgit against the Thai Baht. Despite the stronger revenue, F&N’s EBIT only rose by 0.3% yoy, impacted by: 1) lower economies of scale in its soft drinks segment due to weaker sales volume and higher operating cost (logistics, warehousing and staff), and 2) higher A&P expenses incurred by Dairies Thailand. These offset the better margin from Dairies Malaysia on the back of higher sales volume and cost savings. However, core net profit (excludes one-off receivables and cooler impairment charges of RM4.1m due to the floods in East Coast) saw similar growth as the topline, at 9.6% yoy, thanks to the lower effective tax rate of 13.9% versus 20.2% last year.
Better qoq due to better performance from Dairies Malaysia
On a qoq basis, revenue increased 7.4% while core net profit rose 11.8%. The stronger topline was driven by better sales from Dairies Malaysia (+19.9% yoy) and Thailand (+9.8% yoy), which offset the weaker soft drinks revenue (-2.5% yoy). The better bottomline was due to the higher margin reported by Dairies Malaysia on the back of higher sales volume, cost savings and lower commodity prices from milk and palm oil, which offset the weaker margin in the soft drinks segment.
Source: CIMB Daybreak - 11 February 2015
