PETALING JAYA: Farm Fresh Bhd
’s RM278.1mil dairy project in Cambodia is a long-term bet on the country’s underdeveloped fresh milk market, but analysts do not expect the expansion to drive a near-term re-rating of the stock.
The Farm Fresh Pursat (FFP) project, spanning about 2,500 acres, is expected to include a dairy farm and milk processing facility, with channel checks by CIMB Securities Research indicating potential fresh milk production of up to 40 million litres a year.
Former investment banker turned private equity investor Ian Yoong Kah Yin said the project marked a major step in Farm Fresh’s expansion across South-East Asia, although it was still early days.
“It is early days yet,” he told StarBiz.
“The unconfirmed target of 40 million litres of milk annually is ambitious, but Farm Fresh has proven that it can defy the odds, as proven in its Malaysian farms.”
Tradeview Capital Sdn Bhd portfolio manager Ng Tzyy Loon said the project was positive from a long-term perspective, particularly given the support from the Cambodian authorities.
“This news further confirms that the expansion into Cambodia is not a pure opportunistic move. It’s more a really long-term plan for Farm Fresh’s regional expansion,” he said.
However, Ng does not expect a significant re-rating in the near term, as the Cambodian operations will take time to contribute meaningfully to earnings.
“From the initiation of it to really harvesting and contributing revenue, I think there’s still a long way to go,” he said.
On Aug 5, Farm Fresh, in collaboration with the Pursat Provincial Administration, Sonavith Co Ltd and Cambodia’s Alpha Group, signed a land lease agreement, covering about 1,000 ha, for the FFP project in Veal Veng district, Pursat Province.
It followed a memorandum of understanding signed between Farm Fresh and Alpha Group last October to establish Cambodia’s first large-scale fresh milk production and processing facility.
The project would mark Farm Fresh’s first dairy farm outside Malaysia and Australia.
Citing media reports, CIMB Research said Cambodia’s fresh milk production was estimated at only about 20,000 litres per day, compared with national demand of 90,000 to 100,000 litres, suggesting that local production meets only about 20% of domestic demand.
This supply deficit supports Farm Fresh’s move to localise production and deepen its presence in the country, it said.
The research house estimated that the site could potentially accommodate about 17,000 cows at full scale, based on its land size and the stocking density of Farm Fresh’s Muadzam Shah farm.
Farm Fresh had net gearing of 0.4 times as at end-financial year ended March 31, 2026 (FY26), with net debt of RM348mil.
Assuming Farm Fresh funds 50% of the project and its share is fully debt-funded, CIMB Research estimated that net gearing could rise to about 0.6 times.
It expects startup losses to weigh on earnings during the ramp-up phase.
Beyond the Cambodian expansion, Ng said investors would also be watching consumer demand and input costs, particularly plastic resin, which could affect Farm Fresh’s near-term performance.
The company has faced higher costs for high-density polyethylene (HDPE) resin, which is used for its one-litre and two-litre plastic milk bottles, amid supply disruptions following the conflict in the Middle East and disruptions along the Strait of Hormuz.
In response, Farm Fresh has shifted some output to gable-top paper cartons and secured alternative resin supplies from China and Petronas Chemicals Group Bhd’s Kerteh facility.
Ng said resin supply had since stabilised, although costs remained elevated, adding that Farm Fresh’s results for the first quarter ended June 30 (1Q27) could still reflect the impact of the earlier disruption.
He said investors would need to look to the following quarter for a clearer indication of whether input costs were easing.
Ng added that Farm Fresh’s premium valuation remained another factor limiting the stock’s near-term upside.
Yoong said Farm Fresh was currently trading at about 31 times FY26 earnings, while the Cambodian operations would likely take two to three years to contribute meaningfully.
“Farm Fresh is in my view trading close to fair valuation,” he said.
With the Cambodian project still at an early stage, CIMB Research made no changes to its FY27 to FY29 earnings forecasts.
It maintained its “hold” call on Farm Fresh with an unchanged target price of RM2.30, pegged to 28 times calendar year 2027 forecast price-to-earnings, in line with the stock’s three-year historical mean.
CIMB Research said near-term re-rating potential remained capped by start-up costs from Farm Fresh’s domestic and regional expansion, higher depreciation and rising cost pressures.
For the stock to re-rate meaningfully, it said Farm Fresh would need to deliver stronger-than-expected earnings from its Enstek facility in Bandar Baru Enstek, Negri Sembilan, sustained regional traction and lower input costs.
The Enstek facility is designed to more than double Farm Fresh’s daily ice cream output to about one million pieces.
