PETALING JAYA: CGS-CIMB Research is positive on Farm Fresh Bhd and projecting a robust earnings growth in its coming financial years.
The research house forecast a three-year core net profit compound annual growth rate (CAGR) of 22.6% for Malaysia’s largest fresh milk producer.
CGS-CIMB Research said in its coverage initiation report on Farm Fresh: ”Farm Fresh’s growth profile is backed by capacity expansion plans across its integrated supply chain.
This will allow the company to cater for higher demand from its current operating markets as well as new market pursuits, including Hong Kong, Indonesia and the Philippines, according to the research house.
“We believe that Farm Fresh’s strong research and development culture sets it apart, allowing it to continuously innovate and launch new products to cater for larger consumer groups with various preferences and affordability levels,” CGS-CIMB Research added.
Besides, Farm Fresh stands out from the rest of the local industry players, owing to its vertically integrated supply chain.
Currently, Farm Fresh has six dairy farms and three processing centres in Australia and Malaysia, backed by its multi-channel distribution network that includes its unique in-house home dealer programme.
The dairy farm operator debuted in Bursa Malaysia’s Main Market on March 22, this year with an initial public offering price of RM1.35 per share.
CGS-CIMB Research initiated coverage on Farm Fresh with an “add” rating and a target price of RM1.83 per share, or 28 times calendar year 2023 (CY23) price-to-earnings ratio (PER), in-line with target CY23 PER of domestic peers involved in dairy-based beverages.
The downside risks noted by the research house are a surge in input costs and weaker-than-expected sales volume.