A speeding milk train

(from left): Loi and Mohd Khairul.— SAMUEL ONG/The Star

WHEN a regional conflict disrupted Thailand’s dairy exports to Cambodia in late July, Malaysian dairy group Farm Fresh Bhd stepped up quickly to fill the gap.

Within weeks, the company captured nearly two-thirds of Cambodia’s chilled milk aisle – a “godsend,” says co-founder and group managing director Loi Tuan Ee.

“When the war started and the border was affected, suddenly there was no supply, the whole market (for dairy) just went empty,” he recalls.

That’s when Farm Fresh went into action.

“We are a small company – very agile, very fast. So we seized the opportunity quickly,” Loi tells StarBiz 7.

“We have a distributor there, and within weeks, our products took up about two-thirds of the chilled milk shelves.”

Maybank Investment Bank Research (Maybank IB) estimates Cambodia’s chilled milk market at about US$30mil to US$40mil, with about 80% of milk supply previously sourced from Thailand.

Some goods still flow in through Laos, but Loi says consumer sentiment has turned sharply against Thai products.

To meet the sudden demand, Loi says Farm Fresh has begun shipping yoghurt and other chilled products to Cambodia.

“Because it’s chilled, we only have about 20 days of shelf life. So, we have to be very cautious with how we build up our pipeline,” says Loi.

“But every week now, more products are going over. This week alone, we’re already shipping yoghurt.”

Loi says Farm Fresh has become Cambodia’s top dairy player – and it’s now planning to set up a local factory by early next year.

“In a matter of weeks, we became the number one dairy player there.”

This growth in Cambodia comes as Farm Fresh boosts its capacity and product range at home to support growth across South-East Asia.

When Farm Fresh went public in March 2022, it had just 9,000 dairy cows.

Three-and-a-half years on, the herd has grown to over 13,000, supported by expanded farms, a broader product range, and rising exports across South-East Asia (see graphic).

Today, the group’s facilities can process nearly 300 million litres of fresh milk a year, with 215 million in Malaysia and 84 million in Australia.

No longer just Malaysia’s largest fresh milk producer, Farm Fresh is fast transforming into a regional dairy powerhouse, from planting its flag in the Philippines to seizing the Cambodian market almost overnight.

For Loi, the goal is clear.

“We need to be a pan-Asian dairy company. My total addressable market is not just the over 30 million people in Malaysia – it’s over half a billion across Asean,” Loi says.

While that ambition is still in its early stages, the company’s Malaysian operations remain the key earnings driver.

For the financial year ended March 31, 2025 (FY25), Farm Fresh’s revenue rose 21.1% year-on-year to RM981.2mil, while net profit surged 67.5% to RM106.4mil, boosted by higher margins and strong demand for its newly launched products.

Looking ahead, Farm Fresh expects to cross the RM1bil revenue mark in FY26.

In the first quarter ended June 30, 2025 (1Q26) alone, it booked RM260.6mil in revenue, with net profit growing 26.2% year-on-year to RM32.8mil.

Growth across the board

Farm Fresh’s expansion isn’t just about producing more raw milk, but also moving downstream into higher-value categories.

Currently, chilled milk makes up 37% of sales, UHT milk another 33%, and the rest from yoghurt, ice cream, butter, powder products and others.

Chilled milk refers to pasteurised milk that must be kept refrigerated and lasts for only up to 20 days, while UHT milk can be stored at room temperature for several months.

“The growth is across the board. But in new categories, you’ll see even stronger growth because we’re coming from a lower base,” says Loi.

One fast-expanding area is powdered milk.

Loi notes that Farm Fresh had no powdered milk plant in its early days, but has since expanded into the segment, producing children’s milk powder, food premium powder and soon adult milk powder – all of which are seeing strong demand.

Ice cream is another relatively new but significant category.

Chief financial officer Mohd Khairul Mat Hassan points out that the market is now worth RM1.3bil to RM1.4bil, growing at a compound annual growth rate (CAGR) of 4% to 5%.

Ice cream was on Farm Fresh’s initial public offering (IPO) wishlist, but without the expertise, the group chose to buy its way in via a 65% stake in The Inside Scoop Sdn Bhd for RM83.9mil and a 70% stake in Sin Wah Ice Cream Sdn Bhd for RM28.4mil in 2023.

Mohd Khairul says today, the ice cream segment contributes over 12% of group revenue, with production in Taiping and soon at the new Enstek facility.

He notes that the Taiping plant currently operates three production lines with an output of 280,000 to 300,000 pieces per day, but the upcoming Enstek facility (expected to be completed by January 2026) will scale up capacity to one million pieces daily.

On the outlook for further acquisitions, Mohd Khairul says: “There’s always activity going on behind the curtain. Having said that, we do not have anything firm to disclose at this point in time.”

Regional opportunities

Farm Fresh’s regional expansion is gaining momentum.

In the Philippines, Loi sees a “blue ocean” market, while Cambodia has already proven to be a breakthrough.

Farm Fresh has established a milk processing facility in San Simon, Pampanga, which began operations in August 2024 and now contributes just over 2% of group revenue.

“Unfortunately, in the Philippines, the dairy industry is so small.”

For now, Mohd Khairul says Farm Fresh’s Philippines operations rely on raw milk sourced from its Australian farms.

But he says the plan is to lease land and build a local farm to support the long-term goal of introducing fresh milk and creating a chilled aisle in supermarkets.

“The blue ocean is actually fresh milk. Because there’s not many farms there,” he adds.

Loi says Farm Fresh is intensifying its expansion in both Cambodia and the Philippines, even as it explores opportunities across the wider Indochina region.

Australia – strategic despite losses

Farm Fresh has also been building its presence Down Under.

The group entered Australia between 2017 and 2019, acquiring three farms with nearly 3,000 cows and a processing plant.

However, in FY25, its Australian operations, which include dairy farming as well as the production and sale of milk, butter, yoghurt, sauces and jams, recorded a loss before tax of RM9.79mil, followed by a RM3.41mil loss before tax in 1Q26.

Loi acknowledges that Australia remains a challenging market due to high cost, low returns and setbacks from Covid-19 that disrupted its early investments.

Still, he insists the losses are manageable and the investment critical to Farm Fresh’s growth.

“In Australia, in fact, the losses are also not staggering. It’s just a bit of a loss. Farm Fresh would not have grown to this size if it was not for our Australian investment,” he says.

Loi notes that about 30% of the group’s raw ingredients, including frozen milk, are supplied from its Australian plant, supporting not only the Malaysian business but also operations in the Philippines and now Cambodia.

Loi explains that the group’s initial investment in farms was necessary to secure both genetics and milk supply for its processing plant.

Today, Farm Fresh is selling two of its farms while retaining one – Farm 4 – as a breeder farm for genetic development, keeping about 800 to 900 cows.

The group instead is looking to source the bulk of its milk requirements in Australia from third-party farmers, which Loi describes as “a much more asset-light way to get your milk”.

He points out that Australia’s milk pool is about 8.5 billion to 8.6 billion litres a year compared to between 50 million and 60 million litres in Malaysia.

Loi says Farm Fresh is then looking to redeploy its capital into processing equipment – “where the money is”.

“A dairy farm alone is not very profitable – it’s processing that makes money. So, Australia’s operations should be seen as a whole,” he explains.

“We think that in the coming years, the growth outside Malaysia will be very, very key to Farm Fresh.”

Building a Pan-Asian dairy company

For Loi, 62, the motivation behind Farm Fresh’s growth is not purely financial.

“Going forward, if you ask me what keeps me excited, it’s probably not money,” says Loi, who, with his siblings, ranks among Forbes’ top-50 richest Malaysians.

“For me, the most satisfying part is building a company that people love – whether it’s the company itself or the product.”

He believes Farm Fresh’s experience in tropical dairy farming can be replicated across South-East Asia, with markets such as the Philippines, Cambodia, Indonesia and Laos offering opportunities.

“I truly hope that in seven to eight years you will see Farm Fresh as a pan-Asian dairy company,” he says, noting that products developed in Malaysia could be adapted for regional markets by tweaking taste profiles.

Taking on multinationals, meanwhile, has been part of Farm Fresh’s journey from day one.

“Big Food has been around for the longest time. Some of them for 60 or 100 years. It’s not easy to take on legacy brands that are ingrained with consumers,” says Loi.

“But it’s about your company values, the kind of products you produce, and the branding and positioning you want to take.”

On this front, he notes that Farm Fresh today produces about a third of Malaysia’s fresh milk.

On the operational front, Loi highlights improvements in productivity, with milk yields rising from 13 to 15 litres per cow in the early years to 22 to 23 litres today.

Cows typically go through four to five lactation cycles before being sold once they are no longer productive, a process he admits is “the sad part of the business”.

Funding the ambition

To fund its expansion, Farm Fresh has leveraged a mix of IPO proceeds, sukuk issuance and internal cash flow.

In March 2022, the group launched Malaysia’s then largest IPO of the year, raising RM301mil through the public issue portion of 223 million new shares at RM1.35 each.

Prior to its listing, in May 2021, it also established a RM1bil Islamic medium-term notes programme under the Sukuk Wakalah structure.

Mohd Khairul says only RM300mil of the RM1bil sukuk programme has been issued so far, leaving room to raise more.

This, he explains, positions Farm Fresh to raise an additional RM200mil to RM220mil without affecting its current AA-IS rating from MARC Ratings.

He adds that management aims to cap the gearing ratio below 0.7 times, from 0.5 times currently, and notes that institutional shareholders remain supportive should the company need to tap the equity market for larger growth initiatives.

For FY26, Mohd Khairul says Farm Fresh expects RM150mil to RM160mil in capital expenditure, mainly for its Enstek facility, scheduled for completion early next year.

“We’re completing the expansion of the Muadzam Shah farm (MZ2), which will double our herd to over 6,000 cows by early 2026,” he says, adding that this expansion will result in it supplying an additional nine to 10 million litres of milk per annum.

At the same time, he says Farm Fresh is investing in the Enstek plant, which is slated to be operational in early 2026.

Once completed, it will boost the group’s ice cream production capacity to about one million pieces per day, serving domestic and export markets including Brunei, Cambodia and the Philippines.

To match this output, the group plans to double its chilled product network from 10,000 freezers currently in 99 Speedmart stores and mini marts to 20,000 over three years.

In Cambodia, where its products have just entered the market, the group is weighing options to establish a local production facility.

“One option under consideration is to set up our production facility there and relocate two of our fresh milk production lines, specifically the one-litre carton and two-litre polyethylene bottle, from Johor,” Mohd Khairul notes.

“This would help reduce logistics costs and become our launchpad to penetrate the Indochina market.”

On the marketing front, he says about 2% of annual revenue is allocated to brand-building.

The focus is now towards on-the-ground activities such as food trucks, free sampling at events and schools, and promotional giveaways of sachets.

Analyst view

Analysts remain largely bullish on Farm Fresh, with 11 “buy” calls against two “holds” and one “sell”.

Farm Fresh is trading at around RM2.48 a share, up from RM1.79 a year ago and RM2.03 a month ago, compared to its IPO price of RM1.35. The counter is valued at about 41 times its FY25 earnings.

JP Morgan, in its latest note, says Farm Fresh’s premium-but-reasonable pricing approach fits well with the “wiser wallet” trend among Malaysian consumers and positions the group to strengthen market share.

It adds that expansion into the Philippines is a “key signpost” to watch, as consensus estimates currently assign limited value to the venture.

Maybank IB notes Farm Fresh’s outlook is “solid”, supported by demand for core liquid milk products, new product streams such as ice-cream and powdered milk, and regional expansion into the Philippines and Cambodia.

Particularly, it notes that Farm Fresh began exporting UHT milk to Cambodia in late August 2025 to help fill a supply gap left by Thailand’s conflict. “This also helps build up the Farm Fresh brand name,” it notes.

On the Philippines, Maybank IB notes sales contributed around 2% of group revenue in 1Q26 but are expected to grow with greater penetration into the hotel, restaurant and catering segment and modern trade retailers in central and Greater Manila.