• Maintain BUY (TP: RM2.02). FFB’s 1HFY25 net profit of RM52.2mn (+172% YoY) was in line with both ours and consensus expectations, accounting for 48% and 47% respectively. The strong growth was driven by 1) higher sales from both Malaysia (+33% YoY) and Australia’s operations (+4% YoY), and 2) reduction in costs. An interim dividend of 1.0sen per share was declared, bringing YTD DPS to 2.2sen (vs. 1HFY24: 1.0sen). Moving forward, growing sales are anticipated in spite of Philippines market contribution, increasing SKUs and HORECA sales. We maintain a BUY call on FFB with an unchanged TP of RM2.02 based on PER 30x (2-year weighted average some of global peers) pegged at FY26F EPS of 6.72sen.

• Key Highlights. In 2QFY25, net profit surged by 105% YoY due to 1) higher sales in HORECA segment, 2) positive impact from the new SKUs (i.e. Choco Malt and consumer-packaged goods (CPG) ice cream), and 3) lower raw material costs, as Australian farmgate prices declined by 11% from July 2024. On QoQ basis, the net profit was flat owing to 1) modest revenue growth of 3%, as higher revenue from Malaysia’s operations (+10% QoQ) was offset by the decline in Australia’s operations (-33.6% QoQ) due to lower sales in Goulburn subsidiary, and 2) higher fair value (FV) loss on biological assets of RM2.7mn (vs. -RM0.6mn in 1QFY25).

• Earnings Revision. No changes.

• Outlook. Prospectively, we remain optimistic about FFB’s growth. The expanding SKUs, such as butter, full cream milk powder, and new formats of Choco Malt, present promising opportunities for growth. Additionally, FFB reported that operations in Philippines processing facility have commenced in Sept 2024. The utilisation rate of the CPG ice cream production is gradually increasing with a new additional 120k extruded ice cream line expected to commence in Feb 2025. On the cost front, FFB has hedged whole milk powder up to May 2025 at prices lower than the market. However, RM2.2-2.3mn impact anticipated from the minimum wage hike, which are expected to affect circa 35% of their workforce.

Source: BIMB Securities Research - 29 Nov 2024