Fraser & Neave Holdings Berhad (3689 | FNH MK) Main | Consumer Products & Services
Fraser & Neave Holdings Berhad: 3QFY25 Results Review – Start-Up Drag, But Strategic Pillars in Place
Maintain BUY with a lower TP of RM32.08.
F&N’s 9MFY25 results came in below expectations, due to softer sales in Malaysia and Indochina, startup losses at its integrated dairy operations, and higher tax expenses. We cut our FY25-27F earnings forecasts, factoring in lower sales contribution from Indochina and a higher effective tax rate. Consequently, our TP is revised to RM32.08 (from RM32.68), based on an unchanged 20x PER applied to rolled-forward FY26F EPS of 160.4sen.
Below expectation.
F&N chalked in 3QFY25 revenue of RM1.25b (-6.6%qoq; -4.5% yoy) and core PATANCI of RM98.9m (-30.7%qoq, -20.0% yoy) which brought 9MFY25 core PATANCI to RM395.9m (-13.1% yoy). This came in below expectations, making up 66% of our full-year forecast and 68% of consensus. The negative deviation was due to softer sales in Malaysia and Indochina amid cautious post-festive demand and lower tourist arrivals in Thailand. Additionally, losses from the integrated dairy operations and higher tax expenses weighed on profitability. No dividend was declared for the quarter.
Subdued topline amidst post-festive normalisation.
F&N recorded 3QFY25 revenue of RM1.25b (-6.6%qoq; -4.5% yoy), mainly due to weaker contributions from F&B Malaysia and Indochina. Domestic demand normalised post-festive, while Indochina was impacted by lower tourist arrivals and the Thailand-Cambodia border closure in June. Strong double-digit export growth to other markets helped cushion the decline. Cumulatively, 9MFY25 revenue declined -0.5%yoy to RM3.97b, as strong 1Q sales momentum was offset by softer market conditions in Q2-Q3 and export disruptions stemming from the Thai-Cambodia border closure.
Margin erosion from dairy start-up and tax impact.
3QFY25 operating profit declined -20.8%yoy to RM137.0m, primarily due to softer sales and start-up losses from the Gemas integrated dairy operations. These were partially mitigated by favourable input costs, tighter A&P spend, and operational efficiencies. Core PATANCI fell -20.0% yoy to RM98.9m, further weighed by the non-recognition of deferred tax assets on current-year dairy farm losses. For 9MFY25, operating profit declined -7.9%yoy to RM534.6m, while core PATANCI contracted -13.1% yoy to RM395.9m. As a result, core PATANCI margin narrowed by 1.5ppts yoy to 10.0%, reflecting earnings dilution from the dairy farm, higher foreign withholding tax on dividends from Thailand, and the expiry of BOI tax incentives at its Thai subsidiary.
Outlook.
We maintain a constructive view on F&N’s medium- to long-term prospects, underpinned by its strong brand equity, broad product portfolio, and exposure to essential consumer categories. While near-term sales may remain subdued due to post-festive normalisation and soft tourism activity in Thailand, we expect gradual recovery ahead, supported by sustained demand for ready-to-drink beverages, disciplined promotional strategies, and growing export momentum. Margin outlook remains manageable, with cost efficiencies and portfolio optimisation partially offsetting the earnings drag from its integrated dairy venture. Over the longer term, the Gemas dairy hub remains a strategic pillar, offering vertical integration benefits and positioning F&N to tap into Malaysia’s expanding fresh milk segment.
Eunice Ng Qing Rong
Eunice.ng@midf.com.my
03-2173 8384
Fraser & Neave Holdings: 3QFY25 Results Summary
| FYE Sept (RM’m) | Quarterly results | Cumulative results | ||||||
|---|---|---|---|---|---|---|---|---|
| 3QFY25 | 2QFY25 | 3QFY24 | YoY (%) | QoQ (%) | 9MFY25 | 9MFY24 | YoY (%) | |
| Revenue | 1,245.8 | 1,334.1 | 1,304.1 | (4.5) | (6.6) | 3,969.6 | 3,989.4 | (0.5) |
| Cost of Sales | (871.5) | (905.6) | (897.9) | (2.9) | (3.8) | (2,712.3) | (2,723.9) | (0.4) |
| Gross Profit | 374.3 | 428.5 | 406.2 | (7.9) | (12.7) | 1,257.3 | 1,265.5 | (0.6) |
| Other income | 5.7 | 6.8 | 7.2 | (21.0) | (16.3) | 41.6 | 27.1 | 53.3 |
| Operating expenses | (240.2) | (243.1) | (237.0) | 1.3 | (1.2) | (724.3) | (700.0) | 3.5 |
| Other expenses | (2.8) | (0.4) | (3.6) | (21.5) | 532.3 | (2.8) | (3.0) | (4.7) |
| Operating profit (EBIT) | 137.0 | 191.8 | 172.8 | (20.8) | (28.6) | 571.7 | 589.6 | (3.0) |
| Net finance income/(cost) | (5.5) | (2.2) | (2.2) | 145.9 | 145.9 | (10.1) | (9.0) | 12.3 |
| Profit before tax (PBT) | 131.5 | 189.6 | 170.6 | (22.9) | (30.6) | 561.6 | 580.5 | (3.3) |
| Profit After tax (PAT) | 86.3 | 140.0 | 123.7 | (30.3) | (38.4) | 396.7 | 459.6 | (13.7) |
| PATANCI | 84.8 | 140.3 | 121.6 | (30.3) | (39.6) | 394.1 | 457.8 | (13.9) |
| Core PATANCI | 98.9 | 142.8 | 123.7 | (20.0) | (30.7) | 395.9 | 455.7 | (13.1) |
| Core EPS (sen) | 27.0 | 39.0 | 33.8 | (20.0) | (30.7) | 108.1 | 124.4 | (13.1) |
| DPS (sen) | 0.0 | 30.0 | 0.0 | n.m. | (100.0) | 30.0 | 30.0 | 0.0 |
| Margin (%) | +/(-) ppts | +/(-) ppts | +/(-) ppts | |||||
| Gross Profit Margin | 30.0 | 32.1 | 31.1 | (1.1) | (2.1) | 31.7 | 31.7 | (0.0) |
| Operating Profit Margin | 11.0 | 14.4 | 13.3 | (2.3) | (3.4) | 14.4 | 14.8 | (0.4) |
| Core PATANCI Margin | 7.9 | 10.7 | 9.5 | (1.5) | (2.8) | 10.0 | 11.4 | (1.5) |
| Ratios & Valuation | +/(-) ppts | +/(-) ppts | +/(-) ppts | |||||
| Effective tax rate (%) | 34.4 | 26.2 | 27.5 | 6.9 | 8.3 | 29.4 | 20.8 | 8.5 |
Fraser & Neave Holdings: Breakdown by operating segment
| FYE Sept (RM’m) | Quarterly results | Cumulative results | ||||||
|---|---|---|---|---|---|---|---|---|
| 3QFY25 | 2QFY25 | 3QFY24 | YoY (%) | QoQ (%) | 9MFY25 | 9MFY24 | YoY (%) | |
| Revenue (RM’m): | ||||||||
| F&B Malaysia | 679.1 | 781.6 | 730.0 | (7.0) | (13.1) | 2,230.1 | 2,280.3 | (2.2) |
| F&B Indochina | 565.7 | 551.6 | 573.3 | (1.3) | 2.6 | 1,736.9 | 1,706.1 | 1.8 |
| Property | 0.2 | 0.2 | 0.2 | 4.6 | 0.5 | 0.6 | 0.6 | 1.0 |
| Others | 0.7 | 0.7 | 0.6 | 8.0 | 2.6 | 2.0 | 2.3 | (13.3) |
| Total | 1,245.8 | 1,334.1 | 1,304.1 | (4.5) | (6.6) | 3,969.6 | 3,989.4 | (0.5) |
| Operating Profit (RM’m): | ||||||||
| F&B Malaysia | 25.6 | 73.3 | 73.4 | (65.1) | (65.0) | 195.8 | 249.6 | (21.5) |
| F&B Indochina | 114.4 | 120.2 | 105.2 | 8.8 | (4.8) | 368.0 | 347.9 | 5.8 |
| Property | (1.2) | 0.0 | (0.8) | 47.9 | n.m. | (1.5) | (1.5) | 1.3 |
| Others | (1.9) | (1.7) | (5.0) | (61.7) | 11.0 | 9.4 | (6.3) | (248.5) |
| Total | 137.0 | 191.8 | 172.8 | (20.8) | (28.6) | 571.7 | 589.7 | (3.0) |
| Operating profit margin (%): | ||||||||
| F&B Malaysia | 3.8 | 9.4 | 10.1 | (6.3) | (5.6) | 8.8 | 10.9 | (2.2) |
| F&B Indochina | 20.2 | 21.8 | 18.4 | 1.9 | (1.6) | 21.2 | 20.4 | 0.8 |
| Property | (592.2) | 0.0 | (418.8) | (173.5) | (592.2) | (256.4) | (255.8) | (0.6) |
| Others | (281.5) | (260.0) | (793.0) | 511.5 | (21.5) | 469.9 | (274.3) | 744.3 |
| Total | 11.0 | 14.4 | 13.3 | (2.3) | (3.4) | 14.4 | 14.8 | (0.4) |
FINANCIAL SUMMARY
Profit or Loss (RM’m)
| 2023A | 2024A | 2025F | 2026F | 2027F | |
|---|---|---|---|---|---|
| Revenue | 5,001.4 | 5,245.6 | 5,481.7 | 5,755.7 | 6,043.4 |
| Gross Profit | 1,434.8 | 1,651.0 | 1,735.0 | 1,837.4 | 1,925.4 |
| EBITDA | 790.7 | 847.8 | 854.2 | 909.9 | 944.7 |
| EBIT | 642.9 | 709.5 | 784.1 | 839.7 | 874.3 |
| PBT | 624.7 | 697.0 | 761.1 | 818.5 | 853.1 |
| Taxation | (82.6) | (152.7) | (213.1) | (229.2) | (238.9) |
| PATANCI | 536.9 | 542.8 | 548.0 | 589.3 | 614.2 |
| Core PATANCI | 577.9 | 542.5 | 548.0 | 589.3 | 614.2 |
| Core EPS (sen) | 157.3 | 147.7 | 149.1 | 160.4 | 167.2 |
| PER (x) | 19.5 | 19.3 | 19.2 | 17.8 | 17.1 |
| DPS (sen) | 77.0 | 63.0 | 77.0 | 77.0 | 77.0 |
| Dividend yield (%) | 2.7 | 2.2 | 2.7 | 2.7 | 2.7 |
Cash Flow (RM’m)
| 2023A | 2024A | 2025F | 2026F | 2027F | |
|---|---|---|---|---|---|
| PBT | 624.7 | 697.0 | 761.1 | 818.5 | 853.1 |
| Operating cash flow | 1,053.0 | 732.7 | 450.6 | 589.6 | 613.3 |
| Investing cash flow | (692.9) | (253.7) | (254.6) | (263.3) | (272.2) |
| Financing cash flow | 186.8 | (365.5) | (321.3) | (318.2) | (311.6) |
| Net cashflow | 546.9 | 113.6 | (125.2) | 8.1 | 29.5 |
| Beginning cash flow | 461.9 | 1,031.5 | 1,134.9 | 1,009.6 | 1,017.7 |
| Ending cash flow | 1,031.5 | 1,134.9 | 1,009.6 | 1,017.7 | 1,047.2 |
Growth & Profitability Ratios (%)
| Growth (%) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue Growth | 11.9 | 4.9 | 4.5 | 5.0 | 5.0 |
| Gross Profit Growth | 22.2 | 15.1 | 5.1 | 5.9 | 4.8 |
| EBITDA Growth | 36.9 | 7.2 | 0.7 | 6.5 | 3.8 |
| Core PATANCI Growth | 49.5 | (6.1) | 1.0 | 7.6 | 4.2 |
| Profitability Ratios (%) | 2023A | 2024A | 2025F | 2026F | 2027F |
| Gross Profit Margin | 28.7 | 31.5 | 31.7 | 31.9 | 31.9 |
| EBITDA Margin | 15.8 | 16.2 | 15.6 | 15.8 | 15.6 |
| EBIT Margin | 12.9 | 13.5 | 14.3 | 14.6 | 14.5 |
| Core PATANCI Margin | 11.6 | 10.3 | 10.0 | 10.2 | 10.2 |
Balance Sheet (RM’m)
| 2023A | 2024A | 2025F | 2026F | 2027F | |
|---|---|---|---|---|---|
| PPE | 1,592.1 | 1,727.7 | 1,888.0 | 2,033.5 | 2,185.0 |
| Intangible assets | 433.4 | 430.3 | 476.9 | 500.7 | 525.8 |
| Non-current assets | 2,602.5 | 2,741.5 | 3,058.8 | 3,291.1 | 3,533.9 |
| Inventories | 764.2 | 745.0 | 880.2 | 920.5 | 967.5 |
| ST – Trade receivables | 713.3 | 852.9 | 871.0 | 914.5 | 960.2 |
| Cash | 1,031.5 | 1,134.9 | 1,009.6 | 1,017.7 | 1,047.2 |
| Current assets | 2,509.1 | 2,733.0 | 2,760.9 | 2,852.8 | 2,974.9 |
| Total Assets | 5,111.6 | 5,474.5 | 5,819.7 | 6,143.9 | 6,508.8 |
| Total Equity | 3,351.6 | 3,586.9 | 3,758.4 | 3,973.4 | 4,210.2 |
| LT Loans | 706.0 | 592.0 | 706.0 | 706.0 | 713.1 |
| Non-current liabilities | 909.4 | 777.9 | 912.8 | 916.3 | 932.0 |
| ST Trade payables | 724.8 | 825.9 | 754.5 | 789.1 | 829.3 |
| ST Loans | 4.0 | 114.0 | 4.0 | 4.0 | 4.0 |
| Current Liabilities | 850.6 | 1,109.7 | 1,148.5 | 1,254.3 | 1,366.6 |
| Total Liabilities | 1,760.0 | 1,887.6 | 2,061.3 | 2,170.5 | 2,298.6 |
MBSB RESEARCH (formerly known as MIDF RESEARCH) is part of MBSB Investment Bank Berhad (formerly known as MIDF Amanah Investment Bank Berhad)
(Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MBSB Investment Bank Berhad (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) 197501002077 (24878-Χ). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD). The directors, employees and representatives of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) may have an interest in any of the securities mentioned and may benefit from the information herein. Members of the MBSB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose.
MBSB INVESTMENT BANK (formerly known MIDF INVESTMENT BANK): GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
- BUY Total return is expected to be >10% over the next 12 months.
- TRADING BUY The stock price is expected to rise by >10% within 3 months after a Trading Buy rating has been assigned due to positive news flow.
- NEUTRAL Total return is expected to be between -10% and +10% over the next 12 months.
- SELL Total return is expected to be <-10% over the next 12 months.
- TRADING SELL The stock price is expected to fall by >10% within 3 months after a Trading Sell rating has been assigned due to negative news flow.
SECTOR RECOMMENDATIONS
- POSITIVE The sector is expected to outperform the overall market over the next 12 months.
- NEUTRAL The sector is to perform in line with the overall market over the next 12 months.
- NEGATIVE The sector is expected to underperform the overall market over the next 12 months.
ESG RECOMMENDATIONS* – source Bursa Malaysia and FTSE Russell
- ☆☆☆☆ Top 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- ☆☆☆ Top 26-50% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- ☆☆ Top 51%-75% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- ☆ Bottom 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology
