2 weeks Ago
PETALING JAYA: Beverage and food producer Fraser & Neave Holdings Bhd ’s long-term prospects remain intact but the company will need to weather the impact on profits as momentum builds for the new venture into dairy milk production. Analysts were positive in their reports on the first batch of dairy cows from Chile delivered recently to the company’s 2,726-ha integrated farm in Gemas, Negeri Sembilan, following the cancellation of a delivery late last year from the United States due to concerns over an avian flu outbreak affecting the herd. The delivery of the 2,500 cows represents the first batch of 10,000 targeted for the first phase of the farm, with the population to eventually hit 20,000 when the farm becomes fully operational.
Analysts estimate that based on previous timeline, first milking could start as early as next month or June this year. CIMB Securities expects the integrated farm, known as F&N AgriValley, to be loss-making for at least the next three years owing to start-up costs and a lack of economies of scale, but believes it holds strong long-term potential as the government has targeted self-sufficiency in fresh milk production by 2030, from 62% in 2022. “While the final product mix and revenue model for AgriValley are still being formulated, we believe the milk produced could be processed into intermediate or finished products for both internal use and third-party sales.
The primary market focus will be domestic, with potential export opportunities to nearby countries such as Singapore and Cambodia,” it added. Due to the higher capital expenditure allocation (RM2bil for the first phase and RM1bil for the second), higher depreciation and start-up costs, the brokerage has lowered earnings-per-share for the financial year ending Sept 30, 2025 (FY25) to FY27, with the target price for the shares lowered to RM29.70 from RM30.
50 while the “buy” rating has been maintained. “In our view, F&N’s valuations are attractive as it is trading at a 17.5 times 2025 price-to-earnings (PE), representing a 12.
5% discount to its five-year mean PE (20 times) and a 40.1% discount overall to the consumer sector’s 2025 PE (29.2 times),” CIMB Securities said.
CGS International Securities noted that while there were risks from the US tariffs impacting economic growth, it expects wage increases for the public and private sectors coupled with healthy macroeconomic conditions to remain supportive of consumer sentiment, including efforts to support lower income households to provide a backstop for F&N’s staple products. It has maintained a “buy” call on the stock with an unchanged target price of RM36.50, noting that the company has the ability to deliver a positive revenue outcome followed by profits after a three-year break-even guidance, which would provide an added re-rating catalyst for its shares.
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