TA Research maintained a cautious stance on the company as production yields may be subject to factors such as feed quality.
PETALING JAYA: Fraser & Neave Holdings Bhd
(F&N) will soon be able to export milk from Malaysia once the first phase of its RM1.3bil dairy farm in Gemas, Negri Sembilan, is ready.
The facility is expected to house some 4,000 milking cows by 2025, or only 20% of its full capacity of about 20,000 dairy cattles.
According to Kenanga Research, the farm, which is expected to be ready in 2025, will reduce the group’s reliance on imported milk.
“The farm, which is likely to be the largest dairy farm in South-East Asia, will be fully integrated with a processing capacity of 100 million litres of fresh milk annually, catering to both domestic and export markets,” it said.
This is part of the group’s plan to focus on exports, which provides it a natural hedge against currency fluctuations and prioritising the integration of its food manufacturing plants and dairy farm initiatives, Kenanga Research noted.
However, despite the company’s optimism and ambitious plans for the farm, TA Research maintained a cautious stance on the company as production yields may be subject to factors such as feed quality.
It would also be dependent on whether the cows are able to adjust to the tropical climate in Malaysia, which may take time, TA Research said.
“Additionally, the substantial upfront capital expenditures allocation suggests a longer payback period.
“Therefore, we anticipate the new dairy farm will only significantly contribute to the group’s bottom line in the second half of financial year 2026,” it said.
The research house downgraded F&N to a “hold”, pegging a higher dividend discount model-driven target price at RM30 per share after the recent strength in its share price.
In the fourth quarter ended Sept 30, F&N reported a net profit of RM137.56mil, a 39.1% year-on-year (y-o-y) increase.
The group’s revenue for the fourth quarter rose by 9.4% y-o-y to RM1.24bil.
The stronger revenue was driven by sustained sales momentum in the Malaysian food and beverage sector, higher group exports, contribution from snack and candy maker Cocoaland Holdings Bhd and aided by favourable foreign exchange translation from a stronger Thai baht.
Earnings per share for the quarter ended Sept 30 improved to 37.5 sen.
Cumulatively, for full financial year 2023 (FY23), F&N’s net profit jumped by 40.1% y-o-y to RM536.9mil, while revenue rose by 11.88% y-o-y to RM5bil.
Revenue improved as markets recovered and the company’s price-management strategies implemented last year took effect.
It is noteworthy that the group’s export revenue crossed the RM1bil mark in FY23.
