RHB Research is initiating coverage on Farm Fresh Bhd with a target price of RM1.88, 24% upside with c.1% FY23F (Mar) yield.
It said that Farm Fresh’s proposition to offer fresh dairy products has been well-received and fuelled a significant market share gain.
It said that the FFB is embarking on a multi-pronged expansion plan to capture the rising consumption climate, which will drive exciting earnings growth, in our view.
Together with brand equities, a visionary management team, and strong ESG credentials, it believes the counter deserves a valuation premium, given the scarcity of quality consumer staple stocks in the local market.
Having only started in 2010, FFB rose rapidly to establish itself as a prominent player in the local dairy industry, with a 23% share in the ready-to-drink (RTD) milk market as at March.
Ultimately, it believes its commitment to offer fresh and nutrient-rich dairy products at affordable prices has been the critical success driver.
Going forward, FFB should chart sustainable growth, considering its efforts to further uplift its market share and robust industry growth. The latter is underpinned by rising demand for fresh and organic products, supported by increasing health consciousness and affluence amongst consumers.
Multi-pronged growth strategy. FFB has earmarked MYR240m (80% of its IPO proceeds) for expansion and will increase its production capacity by 23% in FY23, and by another 52% in FY24.
It said that the ambitious expansion will accommodate its growth strategies, including: i) Strengthen its presence in the ultra-high temperature (UHT)/ambient segment, new ventures into the sizeable growing-up milk segment, expansion into new export markets in Indonesia and the Philippines, and new product launches (including plant-based yoghurt and non-dairy packaged F&B products).
Considering all this, we forecast a 3-year net profit CAGR of 21%. · Operating on a “grass-to-glass” model. FFB’s integrated busi
