FPHB: Profitability Falls Short Amid Administrative Expenses, Despite Strong Revenue

PublicInvest Research reported that the company’s core net profit for the fourth quarter of fiscal year 2025 (4QFY25) declined by 31.7% year-on-year to RM1.9 million. After adjusting for non-core items, the core net profit stood at RM2.2 million. The full fiscal year 2025 (FY25) core net profit of RM9 million came in below both PublicInvest’s estimates (92%) and consensus expectations (47%).

Performance Review

The primary reason for this shortfall was higher-than-expected administrative expenses. These expenses were largely attributed to the establishment and operation of newly acquired subsidiaries, including Hong Yun Vegetables & Fruits SB. Despite the profit dip, revenue for 4QFY25 showed robust growth, increasing by 13.6% year-on-year to RM35.3 million. This was driven by strong demand for vegetables, contributing to improved performance in both the wholesale (+13.2% YoY) and retailing (+18.7% YoY) segments. Export sales to Singapore were a significant contributor, surging by 39% year-on-year and now accounting for 36% of the company’s total revenue. The gross profit margin also expanded by 0.7 percentage points to 24.2%, up from 23.5% in 4QFY24, primarily due to the higher margins associated with export sales to Singapore.

Future Outlook and Analyst View

Despite the recent earnings miss, PublicInvest Research maintains a positive outlook on the company’s future growth prospects. The firm believes the company is well-positioned to benefit from government initiatives, such as the National Agrofood Policy 2.0, which are expected to stimulate demand for fresh vegetables. The ongoing expansion of its Senai Centralised Distribution Centre (CDC) is anticipated to be a major growth driver, with approximately half of the additional capacity earmarked to meet the increasing demand from Singapore. The company also plans to enhance its value-added services, including fresh-cut and prepacked vegetables, to capitalize on growing consumer preferences for convenience, which is expected to further improve profit margins. While a strengthening Malaysian Ringgit could potentially temper export sales to Singapore, analysts believe the net foreign exchange impact will be positive for the group, as imports constitute a substantial 70-80% of the cost of sales, potentially leading to an uptick in profit margins.

Rating and Target Price Adjustments

Due to the revised assumption for administrative expenses, PublicInvest Research has cut its earnings forecasts for FY26-27F by an average of 20%. Nonetheless, the firm maintained its “Outperform” recommendation. The target price was adjusted downwards to RM0.45 (from the previous RM0.50), based on a 15x P/E multiple and a higher FY26F Earnings Per Share (EPS), reflecting a smaller share base of 451 million following the completion of a special issue in 4QFY25.