PETALING JAYA: Farm Fresh Bhd
’s valuation is getting a boost from its growing product line and capacity and expansion into regional markets, analysts say.
RHB Research noted the integrated dairy company is in the midst of deepening market penetration with new products to leverage its brand equity and new ice cream production lines, which should help to sustain its growth when commissioned.
“Margins should remain elevated, with stable input costs and an improving product mix. We look forward to the completion of its ice cream plant with higher production capacity in Bandar Enstek, Negri Sembilan, which is expected to contribute commercially by the middle of this year,” the research house said in its latest report on Farm Fresh.
After having made encouraging inroads into the Cambodian market due to ongoing geopolitical tensions with Thailand, Farm Fresh is expanding in the Philippines and is considering a potential foray into the populous Indonesia market.
RHB Research expects the move to help Farm Fresh diversify its markets and underpin long-term earnings prospects.
The research house maintained its “buy” call on Farm Fresh but raised its target price to RM3.26 per share from RM3.03 on the belief that consumer stocks offering earnings visibility due to resilient consumption and a solid domestic earnings base will remain favoured by investors.
“Growing market liquidity and sustained interest in the consumer sector as a defensive shelter will drive a further valuation rerating, following solid share price rallies last year,” RHB Research said.
The research house added the target price valuation implies 36 times Farm Fresh’s price-earnings ratio for next year, which is still at a 20% discount to the valuations ascribed to its large-cap peers.
