So what does this mean for F&N investors?
DBS’ analyst Andy Sim expects F&N to receive a higher dividend income from its increased stake in Vinamilk and has raised F&N’s earnings forecast by 11% to $103 million for FY17, and by 10% to $106 million for FY18.
“We believe [F&N] would continue to be on the prowl for acquisitions to add on to its current geographical and product or brand repertoire,” says Sim in a note on Thursday. “While its available cash has been largely depleted by its investment in Vinamilk, we believe it will leverage on its balance sheet for debt, and possibly equity fund raising.”
Meanwhile, the group’s results for 1QFY17 were within expectation, with earnings falling 12% on higher raw material prices, the weaker ringgit and higher marketing and promotional expenses. Revenue remained stable, aided by the new contribution from its Warburg Vending acquisition, new products, a growing distribution in Myanmar, and the earlier Lunar New Year in 2017.
(See also: Fraser & Neave posts 12.1% fall in 1Q earnings to $22.4 mil on higher costs and expenses)
To that end, the brokerage has maintained its “hold” rating on the stock with a target price of $2.37.
Shares in F&N are trading at $2.11 on Thursday.
