F: Strong Quarterly Performance Drives Earnings Beat, Target Price Raised

Core earnings for the full fiscal year 2025 notably exceeded analyst expectations, primarily propelled by a robust fourth-quarter performance. While cumulative annual earnings saw a slight decline, strategic cost management and operational efficiencies were key drivers in surpassing forecasts.

Performance Review

The company reported full-year core earnings of RM505.0mn, achieving 95% and 97% of TA SECURITIES’ and consensus estimates, respectively. Despite a modest 3.5% year-on-year (YoY) decrease in cumulative FY25 core earnings, profit before tax (PBT) registered a 4.8% YoY increase, reaching RM730.7mn. The annual earnings contraction was primarily attributable to a higher effective tax rate of 29.6%, following the expiration of tax incentives for its Thai operations under the Board of Investment (BOI).

The fourth quarter (4Q) demonstrated exceptional strength, with core earnings more than doubling YoY to RM128.5mn. This surge occurred despite a marginal 2.3% YoY decline in revenue to RM1.2bn, highlighting significant underlying operational improvements across both the Malaysian and Indochina segments.

In F&B Malaysia, 4Q EBIT surged 43.2% YoY to RM79.9mn. This strong performance was a result of vigorous domestic demand, increased export sales to Africa and the MENA regions, reduced input costs, and enhanced operational efficiency. However, the full-year FY25 EBIT for the segment experienced a 9.7% YoY decline to RM275.8mn, despite stable revenue of RM2.9bn, with the robust 4Q cushioning some of the annual contraction.

Similarly, F&B Indochina’s quarterly EBIT improved 4.5% YoY to RM106.6mn. This positive momentum was supported by lower input costs, effective promotional campaigns, and operational efficiencies, which successfully offset a 15.4% YoY revenue decline in the fourth quarter. The softer topline in Indochina was mainly attributed to slower tourism activities, regional flooding, and export disruptions due to temporary border closures. Despite these quarterly challenges, the full-year FY25 EBIT for Indochina still increased 5.5% YoY.

Future Outlook

Looking ahead to the first half of FY26, domestic demand is anticipated to remain robust, buoyed by improving consumer sentiment. Expectations are high for increased festive spending and higher sales volumes within the HORECA channel, aligning with the Visit Malaysia Year 2026 campaign.

Globally, F&B operations in Thailand experienced temporary impacts from a border dispute with Cambodia and a slowdown in tourism, compounded by a stronger Thai Baht against the Chinese Yuan and Indian Rupee in 2025. However, the Thai government’s proactive initiatives to stimulate the tourism sector through major events, targeted promotions, and visa exemptions are expected to foster a more encouraging tourism outlook in 2026.

Analyst View

TA SECURITIES maintains its FY26-27F earnings estimates, reflecting confidence in the company’s strategic direction and recovery trajectory. The investment bank has reiterated a BUY recommendation on the stock, with a target price of RM33.60 per share. This valuation is based on a Dividend Discount Model (DDM) approach.