INVESTMENT HIGHLIGHTS

• 4QFY18 earnings improved by +46.9%yoy to RM76.8m, inline with ours and consensus expectations

• F&B Malaysia segment continue to register improve earnings post-reorganisation exercise

• F&B Thailand segment recorded similar earnings growth as F&B Malaysia

• Interim dividend declared for 4QFY18 of 30.5sen per share

• Maintain NEUTRAL with an unchanged TP of RM34.52

Earnings within our expectations. Fraser & Neave Holdings Bhd’s (F&N) reported higher 4QFY18 normalised earnings of RM76.8m (+46.9%yoy). Cumulatively, full year FY18 normalised earnings grew marginally by +1.5%yoy to RM381.9m. This is within ours and consensus expectations, accounting for 95.0% and 98.0% of full year FY18 earnings forecasts respectively.

F&B Malaysia segment recorded higher profit. F&B Malaysia segment’s normalised operating profit for the 4QFY18 increased by +78.4%yoy to RM33.5m. The stellar performance was mainly due to: (i) operational cost savings and lower overhead post-reorganisation exercise; (ii) favourable input cost for sugar for the quarter as compared to the corresponding quarter and; (iii) lower advertising and promotional expenditure in absence of major festivity during the quarter. However, these are partly offset by the higher packaging material costs.

F&B Thailand segment delivered an improved performance. Similarly, F&B Thailand 4QFY18 normalised operating profit rose by +79.2%yoy to RM60.4m. This is mainly driven by: (i) recovery in domestic sales; (ii) higher export sales to Cambodia and Laos as well as; (iii) favourable input costs.

Dividend declared for FY18. The company has declared an interim dividend of 30.5sen per share for 4QFY18 which is equal to the amount declared in the corresponding quarter. This brings its cumulative FY18 dividend to 57.5sen per share.

Target Price. Our target price remain unchanged at RM34.52 per share which is based on FY19F EPS of 132.8sen pegging to a target PER of 26.0x which is its five-year historical average.

Source: MIDF Research - 9 Nov 2018