FFB: Higher high formation?

Earnings leap on the horizon. Backed by (i) favourable forex and lower raw material costs, (ii) exciting new product launches, and (iii) the turnaround in its Australia unit, FFB’s FY25f earnings is set to soar by an impressive 73% (based on Bloomberg consensus). The outlook is further bolstered by improving consumer disposable income outlook driven by the impending minimum wage adjustment, civil servant pay hikes, and flexible EPF Account 3 – all of which augur well for FFB’s dairy product sales. Notably, the debut of the Choco Malt line in Jul-24 marks an exciting growth avenue for the group, with Malaysia’s chocolate flavoured malt market valued at approximately RM1bn annually. Additional growth is anticipated from upcoming launches, including cultured milk and butter products, which will target the modern retail and HORECA (hotel, restaurant, and café) channels.

Venturing into ice cream business. In a strategic move to expand its product offerings and strengthen its value chain, FFB acquired a majority stake in The Inside Scoop Sdn Bhd and Sin Wah Ice Cream in FY22, paving the way for its entry into the Consumer Packaged Goods (CPG) ice cream market. By Aug 2024, FFB launched its first CPG ice cream under the Farm Fresh brand, capitalizing on Inside Scoop’s artisanal expertise and Sin Wah’s extensive sales network. Moving forward, FFB plans to introduce a range of new flavours, with some products marketed under the Farm Fresh brand and others retaining the Sin Wah label. For premium offerings, the Inside Scoop brand will continue to lead. Through these efforts, FFB aims to capture a 5% share of the RM1.3bn CPG ice cream market.

A breakout. FFB staged a strong breakout above its short-term resistance of RM1.85 on November 5, supported by bullish indicators and an increased trading volume. In view of higher high formation, FFB is poised to advance further toward RM1.94-1.99-2.06 region. Cut loss at RM1.74.

Collection range: RM1.78-1.82-1.87

Upside targets: RM1.94-1.99-2.06

Cut loss: RM1.74

Source: Hong Leong Investment Bank Research - 7 Nov 2024