Maintain BUY with unchanged TP of MYR1.95
FFB’s 4QFY22 results were within expectations. Despite ongoing cost
pressures, we believe that its outlook remains positive alongside steady
upstream and mid-stream expansion plans which will support strong
demand for its products as it ventures into new product categories (kids
growing-up-milk) and regional markets in FY23. We make no changes to
our earnings estimates. Maintain BUY with unchanged TP of MYR1.95
(based on the Malaysia dairy-related CY23 sector average of 29x).
In-line
FFB’s 4QFY22 core net profit of MYR22m (+48% YoY, +41% QoQ) brought
FY22 core net profit to MYR82m (+2% YoY), within expectations at 101% of
both our and consensus full-year earnings estimates.
Improved margins on product price adjustments
4QFY22 revenue was flat YoY (+0.4% YoY) driven by higher contribution in
Malaysia (+6% YoY) but partially offset by lower sales in Australia (-47%
YoY) given the absence of raw milk sales and downsizing of its IXL fruit jam
business. EBIT grew by a wider 8% YoY given improved gross profit of +4%
YoY (GP margin: +1 ppt YoY) led by its 5% product price hike in Sep and
Dec 2021 for its chilled RTD and UHT range respectively. FFB’s positive tax
rate of 7.5% in 4QFY22 is owed to its various tax incentives.
No change to earnings estimates
We keep our forward earnings estimates unchanged and introduce our
FY25E earnings estimates. Our FY23 earnings growth of 27% is on the back
of stronger volume sales led by FFB’s ongoing upstream and mid-stream
capacity expansion; new product launches (eg. Kids growing-up-milk), and
foray into regional markets (i.e. Indonesia, Philippines and Hong Kong). In
light of cost pressures in raw milk, feed raw materials and freight, FFB is
undertaking another round of product price adjustments for its chilled RTD
range of 5% in Malaysia (mid-Jul) and Singapore (1 Aug) to avoid potential
margin erosion.