Hong Leong Investment Bank (HLIB) Research maintained its BUY call on Malayan Flour Mills Bhd (MFM) with an unchanged target price of RM0.93, after the group’s core earnings jumped 28.1% year-on-year in the first half of 2026, supported by stronger flour milling and poultry operations.
MFM recorded 1H26 core earnings of RM84.7 million, with flour sales volumes improving across all its key markets. Volumes rose 6.1% in Malaysia, 5.5% in Vietnam and 5.1% in Indonesia, partly reflecting wheat flour’s improved affordability relative to rice.
Its poultry integration business, operated through 51%-owned DTSB, also recorded a 6% increase in sales volume during the period. Weaker demand from the food services channel was more than offset by stronger retail demand.
Wheat Prices A Key Risk
HLIB cautioned that escalating Russia-Ukraine tensions could pressure MFM’s flour milling margins, given the importance of both countries to global wheat supply.
Russia and Ukraine collectively account for more than a quarter of global wheat exports, and disruptions to Black Sea grain trade could add a geopolitical premium to wheat prices alongside higher freight and insurance costs.
However, HLIB believes the impact could be partly mitigated by sustained flour demand, supported by wheat flour’s relative affordability compared with rice and structural consumption growth across the region.
Vietnam Capacity To Rise 20%
MFM is also expanding the production capacity of its Vietnam-based Vimaflour operation, with completion targeted by end-2027.
The approximately US$20 million expansion is expected to lift production capacity by 20% to 2,500 tonnes per day, providing additional capacity to capture growing regional demand.
Separately, MFM plans to increase its silo storage capacity to 177,000 tonnes from 115,000 tonnes, taking advantage of the ongoing expansion of Lumut Port and its future ability to accommodate larger cargoes.
HLIB said the additional storage could improve MFM’s procurement efficiency for wheat as well as corn and soybean meal used by its poultry business.
Greater storage capacity would give the group more flexibility in managing inventories and potentially generate savings through larger-volume purchases.
MFM is also exploring a potential joint venture with its Japanese partner to move further downstream into flour-related products.
Potential products include frozen dough, ready-to-eat products, premixes and other flour-based offerings.
HLIB said such a venture could allow MFM to capture more value from its existing flour milling operations while diversifying its product portfolio beyond its core milling activities.
The research house kept its earnings forecasts unchanged and valued MFM at seven times mid-FY27 core earnings per share of 13.3 sen.
HLIB said MFM’s investment case remains supported by an improving earnings profile, a relatively robust balance sheet with net gearing of 0.35 times as at June 30, 2026, and an attractive estimated dividend yield of 5.8% per annum.
