Wednesday, August 07, 2013

F&N- bottom-line continued to improve

Result Update

For QE30/6/2013, F&N's net profit jumped 26% q-o-q or 33% y-o-y to RM69 million while revenue inched up marginally by 3% q-o-q or 1% y-o-y to RM910 million. The jump in profitability was mainly due to increased contribution from Dairies Thailand on the back of higher sales & the recognition of the business interruption insurance claim of RM18 million. If the insurance claim of RM18 million is excluded, the pre-tax profit would still increase by 8% q-o-q or 30% y-o-y to RM71 million.

Table: F&N's last 8 quarterly results

Chart 1: F&N's last 27 quarterly results


F&N (closed at RM18.46 yesterday) is now trading at a PE of 26.4 times (based on last 4 quarters' EPS of 70 sen). At this PE multiple, F&N is deemed fully valued.

Technical Outlook

F&N has been range-bound for the past 2 years between RM17.30 & RM18.50. There were a few failed break-ups (in August-September 2012, November 2012 & recently in June 2013) as well as one failed break-down in August-September 2011. Any trading based on breakout must take cognizance of this history of failures.

Chart 2: F&N's daily chart as at August 6, 2013 (Source: quickcharts)


Based on satisfactory financial performance & strong management, F&N remained a good stock for long-term investment. However, F&N's demanding valuation & neutral technical outlook would argue against a BUY at current level. It deserves at best a HOLD rating.

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, F&N.

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