Farm Fresh highlighted that it has a healthy product pipeline.
PETALING JAYA: Analysts are optimistic that Farm Fresh Bhd
will be able to scale volume while expanding into higher-value markets and maintaining industry-leading sustainable standards.
Kenanga Research had met Farm Fresh’s team at its integrated farm and processing facility in Muadzam Shah, Pahang.
It noted that the new high speed line, which was installed two months ago,would be able to scale up production of 24,000 packs per hour compared with 9,000 packs previously.
The investment into the new line was made possible by entering into a five-year contract with the Education Ministry under its school milk programme worth RM600mil.
“Compared with the previous year-or-year contract renewal, this provides improved visibility to scale production which commenced with circa 86 million packs in the first year,” Kenanga Research said.
Farm Fresh will leverage the new line and roll out RM1 chocolate malt UHT drink through stockists selling in schools.
Farm Fresh is also looking at bringing in 900 new cows in addition to the current 6,000 cows – further strengthening its raw milk supply capabilities.
“Current milk yield stands at 18 litres to 21 litres per day, subject to weather although the company aims to lift this into the high-20s,” the research house noted.
Farm Fresh highlighted that it has a healthy product pipeline including cooking cream, whipping cream, and cook-and-whip products, cultured butter and skim milk powder to target restaurants, hotels, cafes and the catering segment.
“This paints a positive picture of Farm Fresh’s ability to scale both volumes and value-added offerings,” it said.
Meanwhile, Kenanga Research also noted that Farm Fresh’s initiatives have a strong environmental, social and governance (ESG) backing to ensure sustainability.
The biogas facility solar panels at its Muadzam Shah farm is part of its energy transition plan.
Kenanga Research reaffirmed its 3.5-star ESG rating on Farm Fresh’s embedded circular systems, local employment models and continuous innovation.
The research house reiterated its “outperform” call on Farm Fresh as well as increased the target price by 12% to RM2.36 from RM2.10.
“This remains at a premium to the peers’ average historical forward price-to-earnings of 26 times to reflect Farm Fresh’s dominant position in ready-to-drink milk and entry into the ice cream segment,” it said.
