Posted Date: May 25, 2021

MARC has assigned ratings of AAAIS (CG) /MARC-1IS (CG) to funding vehicle F&N Capital Sdn Bhd's (F&N Capital) Islamic Medium-Term Notes (IMTN) and Islamic Commercial Papers (ICP) programmes with a combined limit of up to RM3.0 billion. The ratings outlook is stable. F&N Capital is a wholly-owned subsidiary of Fraser & Neave Holdings Bhd (F&NHB) which has provided an unconditional and irrevocable corporate guarantee on the programmes.

The ratings reflect F&NHB's very strong and consistent financial performance from its well-established dairy and beverage lines in Malaysia and Thailand, its low borrowings relative to its operations and its consistently very high liquidity position. Notwithstanding these strengths, the group faces competitive pressures in the fragmented food and beverage (F&B) segment, which has weighed on its domestic sales growth.

F&NHB is one of the most established F&B groups in the region with an extensive operating track record. The group has a leading market position in Malaysia and Thailand in key dairy and beverage segments. It carries a wide range of products marketed under well-known brands; it also has longstanding exclusive rights to manufacture and market "Nestlé" dairy products.

Group revenue stood at RM4.0 billion as at end-September 2020 (FY2020). Contribution to total revenue from its Thai operations has steadily increased, accounting for 49% in FY2020. Sales growth from its Thai operations has offset the decline in its Malaysian sales in recent years and the Thai region will continue to be a key growth market. In terms of production costs, the impact of raw material price movements has been contained through its well-established internal purchasing practices. F&NHB has also implemented cost-saving initiatives and tighter cost control which have contributed to improving its operating profit margin in recent years. Operating profit margin stood at around 13% in FY2020.

F&NHB has low borrowing levels, standing at RM80.6 million at end-1QFY2021, translating to a very low debt-to-equity ratio of 0.03x. Its healthy cash position, which stood at RM680 million has been supported by moderate dividend payout, averaging RM216.3 million p.a. over the last five years.


Farhan Darham, +603-2717 2945/ farhan@marc.com.my;
Gan Peishi, +603-2717 2948/ peishi@marc.com.my;
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my.