PETALING JAYA: Farm Fresh Bhd
is stepping up investments, with RM200mil earmarked for financial year 2027 (FY27) capital expenditure (capex) to support farm upgrades, new product lines, its mineral water venture and expansion in Cambodia.
TA Research said Farm Fresh also indicated that it maintains sufficient balance-sheet flexibility to fund the expansion.
The brokerage said management intends to remain prudent in funding its capex requirements given the sizeable investment pipeline, with net gearing of up to 0.8 times deemed to be within its comfortable range.
Despite the group’s softer first-quarter financial year 2027 (1Q27) performance, analysts maintained a constructive view of Farm Fresh’s earnings outlook as recent price adjustments take full effect, input cost pressures ease and new capacity comes onstream.
BIMB Securities Research noted that the group’s gross margin contracted to 30.5% from 33.2% in 1Q27, mainly due to higher fuel and packaging costs.
Meanwhile, the expansion of its Cambodia operations and the new integrated processing facility in Enstek are expected to strengthen the group’s growth prospects.
Analysts noted that Farm Fresh is pursuing cost-optimisation initiatives after external supply chain disruptions weighed on its 1Q27 margins.
TA Research and BIMB Securities Research highlighted that the group’s shift towards liquefied natural gas (LNG) could help optimise fuel costs.
“Based on current diesel consumption of over 200,000 litres per month, management estimates annual savings of approximately RM4mil to RM5mil.
“The initiative is expected to provide further margin support as it is progressively rolled out to other facilities such as Taiping and Larkin,” TA Research explained.
The research house noted that Farm Fresh started reducing its reliance on diesel by switching to LNG at its Muadzam Shah facility in August, which is expected to cut fuel costs by half.
Separately, Farm Fresh is investing in a large-scale premium mineral water business, which is anticipated to add a new revenue stream and contribute to the group’s overall growth prospects.
“The group plans to invest RM55mil, including RM6mil for stake acquisition, over the next 12 to 15 months to develop the facility, comprising two production lines with a combined capacity of one million bottles per day, as well as a warehouse, aquifer and supporting infrastructure,” TA Research highlighted.
It explained that, in the long run, the venture could improve the utilisation of Farm Fresh’s distribution network while supporting margin expansion.
The research house also highlighted Cambodia as Farm Fresh’s strongest-performing overseas market, prompting the group to localise production to capture further growth, lower distribution costs and ease domestic capacity constraints.
The facility’s 19 million-litre pasteurised milk production line is expected to begin operations in September 2026, or 2Q27.
In addition, Farm Fresh is deepening its Cambodia presence by developing a local dairy farming base to secure a long-term fresh milk supply.
The group entered into a 49-year lease agreement with the local government for 1,000ha of land in Pursat province to develop a dairy farm, TA Research noted.
“The seven-year farming project is expected to require a total capex of US$68mil.
“Management also expects milk yield per cow in Cambodia to reach 20 to 25 litres per day, supported by the low humidity and a more favourable climate for pure Holsteins compared with Malaysia, where yields average 20 to 21 litres per day,” it said.
