For QE31/12/2015, F&N's net profit rose jumped by 167% q-o-q or 117% y-o-y to RM152 million while revenue was up 4.5% q-o-q or 1.6% y-o-y to RM1.05 billion. Profits increased partly attributed to higher revenue, effective product/sales mix (particularly on its main brands) and pricing management and favorable milk-based commodity prices, insurance claim of RM4.1 million (from the East Coast flood) and recovery of withholding on royalties paid in previous years of RM8.5 million. Even if the 2 last items are excluded, the recurring net profit would still be very impressive at RM139 million- an increase of 145% q-o-q or 99% y-o-y!!
Table: F&N's last 8 quarterly results
Chart 1: F&N's last 37 quarterly results
Valuation
F&N (closed at RM18.56 yesterday) is now trading at a PE of 19 times (based on last 4 quarters' EPS of 98.9 sen). At this PE multiple, F&N is deemed fairly valued.
Technical Outlook
F&N has been range-bound for the past 4 years between RM16.00 and RM19.00.A breakout of this trading range would determine the direction of the price movement going forward.
Chart 2: F&N's monthly chart as at Feb 3, 2016 (Source: ShareInvestor.com)
Conclusion
Based on strong improvement in its financial performance and less-demanding valuation, F&N is upgraded from a HOLD to a long-term BUY.
Note:
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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