KUALA LUMPUR (Feb 4): Shares in Fraser & Neave Holdings Bhd (F&N) rose as much as 1.6% this morning, after the group reported a 4.48% year-on-year (y-o-y) net profit growth for its first financial quarter, on the back of higher revenue.

At the noon market close, F&N was up 50 sen or 1.54% at RM32.94, with 131,400 shares traded, valuing it at RM12.07 billion.

The stronger first quarter net profit came amid a 9.98% y-o-y improvement in revenue to RM1.11 billion from RM1.01 billion, driven by better contributions from both its Malaysian and Thai operations, according to its stock exchange filing yesterday.

Following the results announcement and a recent sharp sell-down of the stock amid uncertainties caused by the new coronavirus threat, Kenanga Research upgraded F&N to an 'Outperform' rating with a higher target price of RM35.20 (from RM35.15 previously).

"We deem our valuations to be fair at this juncture, premised on the group's sturdy fundamentals which could provide some form of support under the current market uncertainties, coupled with premium valuations attached to large-cap F&B stocks in lieu of their earnings defensiveness," Kenanga Research analyst Nikki Thang wrote in a note today.

Thang said F&N's new product launches coupled with its booming Thai operation — which takes up 70% of operating profit — will continue to anchor the group's earnings moving forward.

"Notably, the group has announced plans to venture into upstream fresh milk production with the proposed land acquisition in Ladang Chuping.

"Despite minimal near-term impact, we are positive on the long-term benefits from this venture as we believe the facilities would allow the group to expedite growth within the fresh milk segment (which currently takes up low single-digit percentage of total revenue), on the back of more competitive cost advantages," she added.