“F&N retains entrenched dominance in ASEAN Food & Beverage, with No.1 position in canned milk in Thailand and Malaysia and a leading isotonic drink (100PLUS) in Singapore and Malaysia,” states Ng.
The analyst notes that cash flow from the Dairies segment is being deployed into the F&N AgriValley in Malaysia, aimed at insourcing fresh milk supply to create a "farm-to-table" moat, structurally reducing exposure to commodity and forex volatility.
From Ng’s perspective, F&N’s latest FY2025 result reflects an earnings-loading phase with revenue growing by 7.4% y-o-y to $2.32 billion on volume recovery in Dairies and Beverages, but profit after tax declined 4.0% y-o-y to $210.4 million, due to higher effective tax rates following the expiry of Thai Board of Investment (BOI) incentives and a 14% decline in associate contributions from Vinamilk.
“Encouragingly, gross margins remained resilient at 31.3%, supported by cost pass-through and operational efficiencies despite input cost volatility,” adds Ng.
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Looking ahead, the analyst believes the transition from capex to commercialisation is underway, with the Malaysia integrated dairy farm and Cambodia dairy facility on track for commercial production in 1QFY2026.
“While start-up costs may weigh on near-term earnings, these assets provide a medium-term hedge against raw material and forex risks,” Ng comments.
As such, Ng has assigned a “hold” rating on F&N with a target price of $1.91, implying a 26.5% upside.
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“Despite the apparent valuation upside, re-rating remains constrained by the Group’s conglomerate structure and low free float of around 12% which constrains institutional ownership and liquidity,” says Ng.
Ng explains that the above valuation is anchored by the market value of F&N’s listed stakes with a 20% holding company discount applied at the aggregate level, while Times Publishing valued at 0.6 times EV/Revenue and the core business at a conservative 9 times EV/EBITDA, pending clearer evidence of earnings accretion from new capacity.
Shares in F&N closed flat at $1.50 on Feb 9.
