KUALA LUMPUR: MIDF Research maintained a sell call on Fraser & Neave Holdings Bhd (F&N) as it thinks the food and beverage company is overvalued in comparison to the two-year historical price to earning ratio of 26.7 times.
In its notes to investors today, MIDF Research said F&N's recent announcement of RM104.5 million third quarter earnings was a 50.6 per cent improvement from a year ago.
The food and beverage company's nine months earnings grew marginally by 1 per cent to RM303.9 million from previously.
These results were within MIDF research's expectations. The analyst noted F&N's initiatives in operational cost savings, lower overheads and cheaper sugar were partly offset by costlier milk imports, packaging expenses and higher advertising bills during the festive season.
Previously, F&N saw lower sales growth prior to the implementation of Goods and Services Tax (GST) as dealers and distributers destocked their inventory levels.
So, with the upcoming implementation of the new Sales and Services Tax (SST) effective from 1st September 2018 onwards, the analyst highlighted this activity would reccur in the fourth quarter of this year.
Due to the recent price rally to RM37.48 a share, F&N's current price to earnings is now more than 40.0 times while dividend yield has dropped to about two per cent.
--THE END--