F&N: Earnings dropped y-o-y

Result Update

For QE31/12/2017, F&N's net profit rose more than 4-fold q-o-q to RM107 million on the back of a 9.5%-increase in revenue to RM1.07 billion. The huge jump in net profit is attributed to restructuring cost totaling RM50.2 million incurred in the immediate preceding quarter. When we compared the latest result with the same quarter last year, we can see that net profit  dropped 16% while revenue was lowered by 2%.

F&B Malaysia revenue grew by 12.1% q-o-q to RM600.4 million mainly due to lower revenue in the immediate preceding quarter since that was right after the Hari Raya festive season. F&B Malaysia operating profit (excluding one-off items in the preceding quarter) improved by 119.2% to RM41.2 million due to higher volume, lower manufacturing overheads and operational cost savings.

F&B Thailand revenue grew by 6.2% q-o-q to RM468.2 million mainly due selling-in for New Year festive season. F&B Thailand operating profit (excluding one-off items in the preceding quarter) improved by 124.5% to RM75.6 million compared with the preceding quarter mainly due to higher revenue, lower advertising and promotional spending, and favourable input costs.


Table: F&N's last 8 quarterly results


Graph: F&N's last 45 quarterly results

Valuation

F&N (closed at RM29.90 yesterday) is now trading at a PER of 36 times (based on last 4 quarters' EPS of 82.7 sen). At this PER, F&N is deemed overvalued.

Technical Outlook

F&N has rallied after it broke above a triangle at RM25.80-2.6.00. The rally peaked at RM30.30, which is about RM4.00 above the breakout level. That's approximately the distance between the lower line and upper line in the triangle at the widest points in the month of November 2016. Having achieved the 1-to-1 extension, F&N is likely to consolidate this gain for the next few months.


Chart 1: F&N's weekly chart as at Feb 8, 2018_10.00am (Source: Shareinvestor.com)

Chart 2: F&N's monthly chart as at Feb 8, 2018_10.00am (Source: Shareinvestor.com)

Conclusion

Based on demanding valuation and weaker financial performance, I rate F&N as a SELL.

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.