PublicInvest derives fair value of RM1.26 on Leong Hup

Leong Hup targeted to raise up to RM1.2bil from its IPO that includes an offer for sale of shares held by existing shareholders and the issuance of new stocks.

KUALA LUMPUR: PublicInvest research has derived a fair value of RM1.26 on Leong Hup International Bhd ahead of the company's listing on Bursa Malaysia in mid-May.

The research house noted that apart from expanding its leadership position in Malaysian and Singapore, Leong Hup intends to increase usage of its own broiler farms n Malaysia, grow upstream operations in Vietnam and the Philippines and invest in further growth and sustainability.

"The IPO is expected to raise approximately RM275.0m from the issuance of 250.0m new shares. 75.5% of the proceeds will be utilised for capital expenditure (capex) while 12.0% of the proceeds are allocated as working capital that are earmarked for long term future growth," it said in an IPO note.

According to PublicInvest, Leong Hup's competitive strengths include operating in Asean where poultry consumption is fast-growing.

It is also a pure-play poultry producer with meaningful economies of scale and a leading market share, operating in an industry with high barriers to entry and having a scalable platform of operations that allows value creation in all geographies and segments.

Key drivers to growth include increase in disposable income, growing preference for healthier white meat, increase in F&B outlets and quick-service restaurants, improved technoloies and management services, advancements in superior poultry genetics and veterinary science improvements.