F&N: Earnings Dropped Sharply

Result Update

For QE30/9/2017, F&N's net profit dropped 72% q-o-q or 60% y-o-y to RM20 million while revenue dropped by 6% q-o-q - but remained unchanged y-o-y - to RM976 million. Overall revenue dropped q-o-q due to lower revenue for F&B Malaysia revenue due to earlier sell-in for the 2017 Hari Raya Puasa festive season (which took place in the third quarter ended 30 June 2017) and intense price pressure from competitors but partly offset by higher exports as well as lower revenue for F&B Thailand revenue mainly due to higher trade spend and input costs. This led to lower profits and in the case of F&B Malaysia, even a small operating loss of RM11.5 million - undoubtedly aggravated by higher advertising and promotions spending, plus lower exports contribution.


Table: F&N's last 8 quarterly results


Graph: F&N's last 44 quarterly results

Valuation

F&N (closed at RM25.44 yesterday) is now trading at a PE of 29 times (based on last 4 quarters' EPS of 88.3 sen). At this PE multiple, F&N is deemed overvalued.

Technical Outlook

F&N has limited upside due to the resistance from the horizontal line at RM25.50. it is likely that F&N will trade sideways for the next few quarters until earnings rise again.


Chart 1: F&N's weekly chart as at Nov 7. 2017(Source: Malaysiastock.biz)


Chart 2: F&N's monthly chart as at Nov 7. 2017(Source: Malaysiastock.biz)

Conclusion

Despite satisfactory financial performance, I rate F&N as a REDUCE due to demanding valuation.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.