F&N announced its results for QE31/3/2011 yesterday. Net profit increased by 23% q-o-q or 55% y-o-y to RM132 million while turnover was marginally lower (by 2%) q-o-q but was up 16% y-o-y to RM1.01 billion. The improved performance was due to profit from the property division, which has more than offset the decline in the soft drinks division (due to lower sales post the festive seasons) and lower profit from the dairies division due to higher sugar prices.
Table 1: F&N's last 8 quarterly results
Chart 1: F&N's last 18 quarterly results
Valuation
F&N (closed at RM18.40 yesterday) is now trading at a PE of 13.8 times (based on the annualized EPS of 133.6 sen). Is it fair to compute the PE multiple using the results for the first half of FY2011? We must bear in mind that two of its main divisions i.e. the soft drinks & the dairies divisions have suffered profit erosion due to cost increases. F&N's increased profit for QE31/3/2011 was due mainly to higher profit from the property division. Can F&N repeat this performance? If it can do so, then F&N should command a higher PE multiple than the present 13.8 times, possibly up to a PE of 18 times. If it cannot repeat the past 2 quarters' performance, then its net profit could drop back to 90-100 sen. In which case, F&N is deemed fully valued as it would be trading at a fair PE of 18.4 to 20.4 times.
Technical Outlook
F&N is in a strong uptrend which started in 2003. However F&N suffered a sharp sell-off in 2009 when Coca-Cola announced the termination of the Bottler’s Agreements with F&NCC Beverages Sdn Bhd ("F&NCCB") and the Distributor’s Agreement with F&N Coca-Cola (Malaysia) Sdn Bhd ("F&N Coca-Cola") upon their expiry on 26 January 2010. The recovery in the share price happened after Coca-Cola agreed to a 20-month extension of the agreements to 26 September 2012 (go here). Has F&N used this time extension wisely to secure new bottling arrangements with other soft drink giants or develop its own brands to fully utilize the freed-up capacity? Only time will tell.
Chart 2: F&N's monthly chart as at May 3, 2011_log scale (Source: Tradesignum)
Conclusion
Based on the satisfactory financial performance & the positive technical outlook, F&N is still rated a HOLD.
9 comments:
Hi Alex,
Does it apply on Harison as well?
Thank you.
Dear Alex,
Thanks a lot for sharing and it is very useful data for us....
Can you advise me on knm?
Do you think it is time to collect since it slip for few days...
Warmest regards
James
Hi Alex,
Can you comment on current Cypark technical outlook ? I think i have made a mistake by buying too high (3.20). The company seem like having some great prospect on renewable energy sector but its overpriced now.
Should i cut loss or hold?
Tx!
Hi Alex,
Can you comment on CIHLDG and CNOUHUA?
Thanks in millions.
hi bro alex. thx alots for ur comment on PJI and let me made alots from it. this time same source ask me buying GSB(7077), GSB will announce its 4Q result this month. they said 4Q EPS will be around 1sen - 1.5sen. their target for this GSB is 20sen.
bro alex. GSB can buy ?? thx.
Hi wong
GSB looks quite bullish. Its immediate support is at RM0.075. It has a breakout known as Cup with handle. The trigger for the rally continuation is an upside breakout above RM0.085. If/when that happened, the stock could rise to first target RM0.10-0.11 & next target RM0.15.
I cannot remember my comment on PJI. I probably gave you a neutral take of "what to look out for" & you made the 'correct' decision that led to a profitable trade.
Hi Chun Mun
My take on your stocks are:
1) CIHLDG has broken its uptrend line at RM3.00 in mid-April. Its strong horizontal support is at RM1.60-1.70. I expect the RM2.00 psychological level could be a decent support as well. However, these levels are still very far away. If you want to get in earlier (which may not be advisable), do so very slowly. In technical parlance, getting in early is called 'catching a falling knife'. Let the professionals do this dangerous stunt. We get in once the signs are clear. Of course, we won't be getting in at the lowest price but at least we won't lose our fingers or worse still our hand.
2) CNOUHUA is in a clear downtrend. Fundamentally, it looks good. If so, why is it trending lower? Again, we must ask ourselves whether there is something wrong with the company. This maybe a case of relying on the crowd wisdom to guide us in our decision. Some may say the crowd does not know. That may be true but the insiders knows. If the company is so good, why aren't they buying? Maybe they did but the sellers are too persistent. In that case, let us wait out the sellers & jump in when the selling momentum has been exhausted.
Hi Onegreatdeal
I would rate KNM a trading BUY when it hit RM2.15-2.25 and a trading SELL when it hit RM2.80.
Hi ryan
Harison is an attractive stock. It is presently trading at a PE of about 7 times.
However, Harison is just a trading house, albeit a very well-managed trading house. Harison does not own the brands which carry goodwill. It may even lose the agency & its sales may be affected. For that reason, it would never attract the multiples that Nestle can command nor even the multiple that F&N can command. However I believe Harison could trade up to a multiple of 8-10 times.
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