KUALA LUMPUR (Feb 7): Analysts are optimistic about Fraser & Neave Holdings Bhd’s (F&N) performance in the quarters ahead as they see its operation in Thailand improving with the return of international tourists and the strengthening of the baht against the ringgit and US dollar.

Other factors such as the full-year impact of the economy reopening and demand recovery bode well for the food and beverage (F&B) company.

F&N reported a 10% top line growth for its first financial quarter ended Dec 31, 2022 (1QFY2023), with its operation in Malaysia (24% year-on-year growth) offsetting its weaker performance in Thailand (5% y-o-y decline), which was hit by lower export sales to Indochina on price hikes.

The group's revenue rose to RM1.22 billion from RM1.11 billion a year ago, while its net profit more than doubled to RM198.8 million in 1QFY2023 from RM92.95 million in 1QFY2022.

CGS-CIMB Research analyst Walter Aw expects the recovery of its Thai operations, along with lower freight costs to uplift F&N’s export sales and gradual easing of input costs to drive F&N’s margin, will help the group to post stronger performance for the rest of its financial year ending Sept 30, 2023 (FY2023).

He is projecting F&N to post an 11.3% y-o-y growth in net profit to RM447.4 million for FY2023, RM486.5 million for FY2024 and RM525.8 million for FY2025. The group posted a net profit of RM383.21 million on revenue of RM4.47 billion in FY2022.

Aw is maintaining an “add” call on the stock, with a higher target price (TP) of RM28.30 from RM23.70 previously.

Kenanga Research analyst Ahmad Ramzani Ramli is also positive on F&N’s earnings prospects, premised on the full-year impact of the economy reopening, accommodative policies, bigger celebrations of coming festivities.

He added that the top line will be boosted by a full-year contribution from Cocoaland Holdings Bhd, following the acquisition of the entire equity interest in Cocoaland by F&N in November 2022 for RM489.2 million cash.

Ahmad Ramzani also noted that F&N’s downside risk to margins is now more manageable given the weakening of the US dollar against both the ringgit (-12%) and baht (-18%). However, he warned that food commodity prices, which F&B players in general are at the mercy of, remain volatile.

Kenanga Research is maintaining a TP of RM26.11, but downgraded the stock to “market perform” from “outperform" as it said valuations have become rich after the recent run-up in its share price.

At noon break, shares of F&N closed 96 sen or 3.84% higher at RM25.96, translating into a market capitalisation of RM9.52 billion. The counter was the second top gainer on Bursa Malaysia in the morning session. Its share price has risen 7.63% over the past year.