Within expectations. Fraser & Neave Holdings (“F&N”) reported a 3MFY25 core PATANCI of RM154.1m, after excluding one-time off item of - RM14.9m. This met our full year FY25 forecast and consensus at 26% and 27% of full year expectation respectively. As anticipated, no dividends were declared during the quarter, as F&N historically declares dividends from 2Q/3Q onwards.

Core PATANCI declined -9.4%yoy, rebounded +42.2%qoq. On a year-onyear basis, core PATANCI declined -9.4%, primarily due to a higher effective tax rate of 29.2% (+12.0ppt yoy), which offset the operational improvements achieved during the period. The increase in tax expenses was due to the expiry of tax incentives, leading to a higher taxable base. Despite this, the sequential quarter performance demonstrated a robust recovery, with core PATANCI surging by +42.2%qoq. This rebound was supported by seasonal festive-driven demand, better cost absorption, and improved economies of scale. Notably, the Malaysian operations saw a significant boost, driven by stronger sales from the Chinese New Year period. Additionally, operating profit benefited from an enhanced sales mix and lower input costs, which, in turn, led to a +1.8 ppts expansion in the operating profit margin to 17.5%.

Nevertheless, revenue came in higher. Despite the weaker profit performance, revenue rose +4.3%yoy to RM1.39b, driven by strong festive sales in Malaysia, a recovery in Thailand's domestic market supported by higher tourist arrivals, and improved performance in the Indochina region. In Malaysia, revenue increased +0.9%yoy, while Thailand saw an +8.9%yoy growth, supported by higher sales and effective promotional activities. On a quarter-on-quarter basis, revenue rose +10.6%, driven by stronger seasonal sales and a rebound in consumer spending.

Maintain BUY with an unchanged TP of RM36.77. We make no changes to our earnings forecast, as the core PATANCI in line with our expectations. Our TP is based on an unchanged PER of 22.5x pegged to FY25F EPS of 163.4sen.

Outlook. We remain optimistic about F&N’s prospects, supported by sustained demand for out-of-home beverages, a rebound in tourism across Thailand and Malaysia, and a shift towards local brands. Looking forward, F&N remains focused on driving growth through enhanced route-to-market capabilities, operational efficiencies, and the ongoing development of its integrated dairy farm and dairy manufacturing plant in Cambodia. Furthermore, stabilizing commodity prices and a relatively favorable foreign exchange environment should support profitability in the coming quarters.

Source: MIDF Research -