FRASER & Neave Holdings Bhd (F&N) is primed to capitalise on the forthcoming heatwave in Southeast Asia, leveraging its dominant position in the food and beverage (F&B) sector across the region.
According to MIDF Research, F&N stands as the frontrunner in Malaysia for various beverage categories including ready-to-drink tea, carbonated soft drinks, evaporated milk and sweetened condensed milk, based on the Retail Index Service.
“We expect that the extreme weather will lead consumers to seek refreshing and convenient options to stay hydrated and cool, thereby increasing the demand for ready-to-go (RTG) drinks and out-of-home (OOH) beverages,” it said.
F&N’s stronghold extends beyond Malaysia with the company also holding top positions in condensed milk, evaporated milk, and sterilised milk segments in Thailand.
As Southeast Asia braces for the current El Niño event, anticipated to persist until mid-May followed by an expected La Niña event from June to September 2024, F&N’s revenue for the second and third quarters of the 2024 financial year (2QFY24 and 3QFY24) is forecasted to experience a significant surge.
“The demand for its products is not only in key operating countries like Thailand and Malaysia but also through exports across Southeast Asia, considering the extreme weather.
“This is on the back of the current El Niño event across the region that is expected to continue until mid-May before the anticipated La Niña event (June-September 2024),” it noted.
MIDF Research has adjusted its earnings forecast for the financial years 2024 to 2026 (FY24-FY26) upwards by 5.2%, 3.8%, and 2.6%, respectively, attributing the revision to heightened demand for OOH beverages in the first half of calendar year 2024 (1HCY24).
Moreover, F&N is embarking on an integrated upstream fresh milk venture with plans to produce 100 million litres of fresh milk in Gemas, Negeri Sembilan, with initial milking expected in early 2025.
“The first milking is expected in early 2025. This initiative enables the group to achieve self-supply and reduce operating costs.
“The target of achieving total production of 200 million litres of fresh milk following the completion of all phases would also allow the group greater capacity to cater to both local and international markets and hence expand business revenue,” it further added.
Furthermore, MIDF Research noted that F&N’s parent company Fraser & Neave Ltd’s investments in Vinamilk, Vietnam’s largest dairy company, which could provide valuable market insights for F&N’s involvement in the dairy farming sector.
Consequently, the target price for F&N has been revised upward to RM37 from RM33.50 previously.
“F&N is poised to benefit from the shift in Malaysian consumer preferences towards local brands, and we appreciate the group’s investment in the integrated dairy farm to enhance self-supply, which can improve cost management and reduce reliance on imported milk.” – April 17, 2024
Main photo credit: Bernama
