This article first appeared in The Edge Financial Daily, on February 12, 2016.

Fraser & Neave Holdings Bhd (-ve)

SHARES of F&N (fundamental: 2.1/3, valuation: 1.7/3) increased by 1.06% to RM19.10 yesterday after 476,900 shares changed hands. Year to date, the share price has increased by 5.29%.

The Group announced their 1QFY16 results on Feb 2, 2016; its net profit rose 116.9% to RM151.7 million for the quarter from RM69.9 million a year ago. This was despite the marginal growth of 1.6% in revenue to RM1,053.3 million from RM1,036.3 million previously.

The significant profit rise is due to a favourable product mix and lower commodity prices. On the other hand, the group’s revenue only registered a slight increase as a result of the termination of its exclusive marketing, distribution and sale of Red Bull energy drink deal, in phases, in 4QFY15.

In a filing to Bursa, F&N said the group benefitted from lower advertising and promotion expenses, East Coast flood insurance claim recovery, along with the absence of flood-related costs and provisions made in the corresponding quarter.

F&N management said moving forward, weaker consumer demand will result in intensifying trade price competition and that its focus will shift towards end-consumer programmes, pricing and activities, which will soften contribution margin.

The group’s management also took note of the volatility in the local currency and has hedged its foreign currency requirements to negate any potential negative foreign exchange impact.

Looking at its Bursa’s filings, two substantial shareholders of the group, the Employees Provident Fund (EPF) and the Amanahraya Trustee Bhd have been accumulating F&N’s stock since the end of 2015.

EPF increased its holding from 8.14% in December 2015 to 8.24% as of January 27, 2016, while Amanahraya improved their holdings to 16.8% of the group’s outstanding shares on January 27, 2016 from 16.2% in December 2015.

The group currently trades at a trailing P/E ratio of 19.14 times and 3.49 times book.