MIDF Maintains Trade Call for F&N with Unchanged Target Price of RM33.07 | Money


KUALA LUMPUR, November 8 – MIDF Research has maintained its call to buy on Fraser and Neave Holdings Bhd (F&N) with an unchanged target price (TP) of RM 33.07 after the company shared its outlook for FY2022 (FY22).

The food and beverage company (F&B) is expected to maintain its export-focused strategy for F&B Malaysia and Thailand to guard against financial disruption caused by Covid-19.

“Therefore, we are optimistic for F&N and maintain our earnings estimate,” MIDF Research said in a note today.

Along with its outlook, F&N also updated that its integrated warehouse and solar farm are now nearing completion, supporting MIDF’s positive appeal on the group.

It said two of its four ongoing projects will be completed by the end of calendar year 2021 (CY21) and the remainder in the first quarter of calendar year 2022 (1QCY22).

The new integrated warehouse located in Shah Alam with an automatic storage and retrieval system with a capacity of over 50,000 pallets would reduce fuel consumption, shorten delivery times to customers and lower operational costs.

Meanwhile, F&N’s new solar photovoltaic (PV) system is expected to save RM 3-4 million in annual electricity costs.

“However, the risks to our appeal include a higher than expected Cukai Makmur tax (prosperity tax) and a high corporate tax on foreign source income,” MIDF said.

MIDF said the implementation of Cukai Makmur on F&N is still pending clarification.

The company noted that the calculation of Cukai Makmur is done at the entity level and not at the group level; and F&B Holdings Bhd has a few legal entities none of which have taxable income over RM100 million.

“However, one plausible concern is the removal of corporate tax exemptions for foreign source income. At present, F&B Thailand operating profit is 81.3% of total operating profit, ”he said.

At 11:08 am, F&N lost 0.62 sen to 26.68 RM, with 27,000 shares traded. – Bernama

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