PETALING JAYA: Integrated dairy company Farm Fresh Bhd
’s margins remain under pressure from higher diesel, fertiliser, and dairy commodity costs as consumers pull back spending amid the current inflationary environment, says CIMB Research.
The brokerage reiterated a “hold” rating on the stock with an unchanged target price of RM2.30, pegged to 28 times 2027 price-to-earnings in line with its three-year historical mean.
“In our view, near-term re-rating potential remains capped by start-up costs, higher depreciation, and a rising cost backdrop,” it said.
The company continues to face cost pressures from diesel, fertilisers, and dairy commodities, with diesel consumption costing RM1mil monthly while fertiliser costs have also increased significantly.
Whole milk powder prices are estimated to have risen to US$3,500 to US$3,600 per tonne, from US$3,300 per tonne in 2025.
It added that a meaningful re-rating would require better-than-expected earnings accretion from the company’s upcoming production facility located in Bandar Enstek, Negri Sembilan, alongside sustained regional traction and lower input costs.
The plant, with production lines for consumer-packaged goods ice cream and new ready-to-drink beverages, has a target commissioning date by the second quarter ending Sept 30, 2026 (2Q27). The facility’s second wing includes high-protein milk drinks, fruit juice, and bottled tea.
The company also targets expansion of brand lines to at least five from three, with product categories including ultra high-temperature milk, butter, skim milk powder, and ultra-filtered high-protein milk products planned to be rolled out over the coming quarters.
Farm Fresh management shared during an investors’ meeting at Invest Malaysia 2026 that the proposed acquisition of Sabah-based Amelia, an ice cream company, would be completed by by the first quarter of the financial year ending March 2027.
Amelia currently generates RM15mil to RM16mil in annual revenue and RM1.5mil in annual profit after tax, with the acquisition to provide the company access to five production lines, 25 owned trucks, and 3,500 freezer points across Sabah.
“Farm Fresh also plans to utilise surplus space at Amelia’s Kota Kinabalu Industrial Park factory to install a pasteurised fresh milk line, enabling the group to serve Sabah, Sarawak, and Brunei with its core chilled milk products,” it said.
The company’s total dairy cow population at the Muadzam Shah farm has now exceeded 10,000 head, with fresh milk output improving meaningfully over the past three years to 19 million litres from 14 to 15 million litres prior to its initial public offering in 2022.
“Farm Fresh also stated that product innovation remains a key growth strategy, underpinned by the launch of high-protein milk products. Its upcoming high-protein milk is expected to contain 8g to 9g of protein per 250 ml pack (or 3.7g per 100 ml), supported by ultra-filtration technology,” CIMB Research said.
