• Maintain BUY (TP: RM2.02). FFB’s 1QFY25 net profit of RM26.0mn (+308% YoY) was in line with both ours and consensus expectations, accounting for 24% and 25% respectively. FFB’s 1QFY25 revenue and net profit both spiked by +30.3% YoY and +308% YoY, mainly driven by the Malaysian segment revenue, with emphasis on the increase in sales in HORECA, higher sales from new products and the full quarter contribution from the ice cream subsidiaries, Inside Scoop and Sin Wah. Concurrently, FFB’s GP margin improved to 30.2% from 17.7% YoY thanks to the lower raw material costs. Prospectively, sales are anticipated to continue to increase from the increasing HORECA sales and growing SKUs. We maintain a BUY recommendation on FFB with a higher TP of RM2.02 (from RM1.75) as we roll-forward our valuation which is based on PER 30x (2-years weighted average some of global peers) pegged at FY26F EPS of 6.72sen.

• Key highlights. In 1QFY25, both revenue and net profit surged by +30.3% YoY and +308% YoY respectively, supported by the hike in overall sales volume, particularly increase in HORECA’s sales volume, higher UHT sales, and sales contribution from the new SKUs along with the 10% revenue contribution from Inside Scoop and Sin Wah. Similarly, net profit rose due to reduction in input costs as raw material such as whole milk powder (WMP) and feed cost have eased. On QoQ basis, revenue and net profit rose by +12.4% and +8.6% respectively, mainly due to higher chilled milk sales and increase in Farm Fresh Grow (FFG) powder format sales volume.

• Earnings Revision. No changes.

• Outlook. Moving forward, we continue to have a positive outlook on FFB supported by the rapid expansion in SKUs such as the consumer-packaged goods (CPG) ice cream, Choco Malt, butter catered to both HORECA and retail market, as well as FFG cultured milk to be fully launched by 2HCY24. Moreover, we believe FFB’s input cost will further ease from their hedging position for whole milk powder and the impact of ringgit strengthening is anticipated to benefit FFB as some of FFB’s input cost such as WMP and packaging materials are denominated in USD.

Source: BIMB Securities Research - 30 Aug 2024