PETALING JAYA: Farm Fresh Bhd
’s Muadzam Shah 2 (MZ2) farm in Pahang currently houses approximately 900 dairy cattle, including 200 to 250 milking cows, with the group now targeting to import another 3,000 dairy cows by November 2026.
Kenanga Research said this is double its previous guidance of importing 1,500 dairy cows by October 2026.
“Milk production from the new herd is expected to commence around March 2027,” it said following a visit to the farm.
Tradeview Capital Sdn Bhd portfolio manager Ng Tzyy Loon said the Muadzam Shah expansion remains one of the few growth catalysts that has yet to be fully reflected in Farm Fresh’s valuation, as it will take time for the enlarged herd to translate into higher milk production and earnings.
“Probably, you may see the effect from the Muadzam Shah expansion in the next financial year,” he told StarBiz.
The farm is designed with 10 barns, six of which have been completed while the remaining four are under construction, and is expected to accommodate about 4,000 cows upon completion, similar to the group’s MZ1 farm.
Together, the two farms will have a combined capacity of approximately 8,000 cows, making Muadzam Shah the group’s largest integrated dairy farming hub, according to Kenanga Research.
Beyond this, the research house said Farm Fresh continues to expand its domestic and regional operations.
It added that Farm Fresh’s Enstek manufacturing hub remains on track to commence operations in August, following earlier delays.
Once operational, the facility will more than double Farm Fresh’s ice cream production capacity to about one million pieces a day from the current 450,000 pieces produced across its existing plants, with the additional capacity expected to support exports, including to Thailand.
Kenanga Research said Farm Fresh is also exploring a commercial dairy farm under the proposed Keningau Dairy Valley project in Sabah after signing a memorandum of understanding with the Sabah Rubber Industry Board and the Sabah Department of Veterinary Services.
Meanwhile, the group’s new US$12.8mil (RM55mil) manufacturing facility in Cambodia is now expected to begin installing its first phase of production lines in October, slightly later than the earlier July to August target.
The first phase will comprise two pasteurised milk production lines with a capacity of 19.3 million litres per annum, followed by two ultra-high temperature or UHT milk production lines with a combined capacity of 34.1 million litres per annum in the second phase by January 2027.
Moreover, Kenanga Research pointed out that the facility will enable Farm Fresh to serve the Cambodian market more cost-effectively, while supporting its longer-term expansion into the wider Indochina region.
Despite the group’s expansion plans, the research house maintained its “market perform” call with an unchanged target price of RM2.25, saying much of the anticipated upside has already been reflected in current valuations.
The target price is based on an unchanged 28 times financial year 2027 price-to-earnings multiple, broadly in line with peers’ average historical forward multiple of 29 times.
Yesterday, Farm Fresh closed flat at RM2.25, valuing the stock at a trailing price-to-earnings ratio of about 32 times.
By comparison, Dutch Lady Milk Industries Bhd traded at a price-to-earnings ratio of 19 times.
In addition, Tradeview’s Ng said Farm Fresh continues to command a premium valuation due to its strong execution track record.
“It is always a premium that the market needs to pay for a leader that can execute well,” he said.
He added that the recent weakness in the company’s share price was mainly due to concerns over higher plastic packaging costs stemming from the Middle East conflict, as well as softer consumer sentiment.
Previously, CIMB Research estimated that the conflict could directly affect about 8% to 10% of Farm Fresh’s total cost base through higher packaging, diesel-linked logistics and utility costs after disruptions to its high-density polyethylene (HDPE) resin supply affected production of its one-litre and two-litre plastic bottles.
Furthermore, Farm Fresh has since raised prices for selected plastic-bottled products, increased production of gable-top cartons and sourced HDPE resin from China, restoring plastic bottle supplies to pre-conflict levels.
