Gemas farm to bolster F&N’s performance

PETALING JAYA: Fraser & Neave Holdings Bhd’s (F&N) financial performance in the years ahead is set to get a boost from its dairy segment, which is gaining capacity, analysts say.

The fast moving consumer goods (FMCG) producer’s cattle farm in Gemas, Negri Sembilan, has received 2,500 pregnant heifers from Chile, which takes its total herd size to about 6,900 and double its lactating cow herd to about 5,000 in its current financial year ending Sept 30, 2026 (FY26).

The dairy plant there is targeted for its commercial run in January next year while F&N’s Cambodian dairy plant is scheduled to begin operations next month, and thereby reduce reliance on products imported from Thailand.

“Lower feed costs at its dairy operations should allow for a stronger performance in the second half of FY26 (2H26) in our view,” CGS International Research (CGSI Research) stated in a report on F&N following an analysts’ briefing with management.

The research house raised its FY26, FY27 and FY28 net profit estimates for F&N by 0.5%, 1.7% and 2.2%, respectively, on higher margin assumptions.

F&N’s management informed analysts that quarterly losses from the dairy farm business are close to peak levels and should narrow by 2H26 as the increased costs of new cows delivered will be mitigated by rising revenue from milk production.

Feed costs will also be reduced as corn silage from its recently harvested corn crops replaces purchased silage.

“Management sees the production of its own feed as a key driver of its dairy farm’s profitability. Its existing herd delivered above 28 litres of milk per cow daily, exceeding the Malaysian average of 15 litres,” CGSI Research said.

F&N is expected to generate about 25 million litres of fresh milk annually at that production rate and cattle headcount.

F&N sees domestic milk production at a lower cost structure as a means to replace imported milk as well as dairy products such as butter, yogurt and cream.

TA Research, meanwhile, expects F&N’s FY26 topline performance to remain resilient, supported by ongoing product innovation, a recovery in demand in Thailand, and increased contributions from the dairy farming segment.

However, the research house has revised its earnings projections for F&N down by 3.9% for FY26 and 2.4% for FY27 with the incorporation of FY25 numbers.

It revised its target price for the FMCG company to RM32.97 a share from RM33.60, but maintained its “buy” call on the stock.

CGSI Research kept its “add” call on the stock but upped its target price to RM37 a share from RM36.50, with the dairy farm identified as the key catalyst to drive a rerating.

It added F&N shares trade at an undemanding 16.8 times next year’s price-earnings multiple versus its large cap consumer staple peers at above 30 times.

Kenanga Research said F&N’s near-term earnings remain partly weighed down by a slower recovery in its regional business, which led it to trim F&N’s FY26 and FY27 earnings by 3% each and lower its target price to RM32.85 a share from RM33.95.

It however maintained its “outperform” call on the stock.