Acquiring land to build a hub in Klang Valley
? FFB announced yesterday plans to acquire an 8.1 acre plot of freehold
industrial land from THP Enstek Development Sdn Bhd for RM18.2m.
? It plans to build a new manufacturing hub on the plot of land to increase its
existing production capacity for dairy and plant-based products.
? While this is positive news, it is not a surprise as FFB previously mentioned
plans to set up a manufacturing hub closer to Klang Valley.
Plans to acquire 8.1 acres of freehold industrial land in Seremban
? Farm Fresh Berhad (FFB) announced yesterday that it has entered into a Sale and
Purchase Agreement to acquire an 8.1 acre plot of freehold industrial land in Seremban,
Negeri Sembilan, Malaysia, from THP Enstek Development Sdn Bhd. We believe that
this land is located in Techpark@Bandar Enstek. The proposed acquisition is expected
to be completed within 6 to 9 months from the date of this announcement (30 Jun 2022).
? The acquisition price of RM18.2m (RM52 per sq feet) was arrived at on a willing-buyerwilling-seller basis. According to FFB, the price was determined after considering the
recent transacted prices at Techpark@Enstek Phase 2, Bandar Enstek, and the
suitability of the land in terms of size, accessibility, readiness and strategic location.
Ongoing expansion plans as stated in its IPO prospectus
? Based on its latest IPO prospectus, FFB plans to set up a new manufacturing hub in the
central region of Peninsular Malaysia and increase its production capacity for dairy and
plant-based products by an additional 13.6m litres annually. FFB intends to use this
facility to develop new product offerings for the Malaysian market, including ice cream
(planned initial annual capacity of 2.3m kg). We estimate that this plant will likely be
commissioned by 2HFY3/25F (4QCY24F), which is in line with our expectations.
The proposed acquisition will be funded by FFB’s IPO proceeds
? We are positive on this announcement, as it would allow FFB to stay on track with its
plans to build a manufacturing hub near Klang Valley. In our view, the purchase price is
attractive given that it is lower than the land acquisition cost set aside during its IPO
(RM30m). FFB also set aside RM15m from its IPO proceeds to build a new
manufacturing hub on this land. Note that FFB is in a net cash position of RM24.1m (as
at end-4QFY3/22).
We are positive on this announcement due to the suitability of land
? We believe that this land is strategically located (15 minutes to KLIA and 30-35 minutes
to Klang Valley), helping FFB improve its cost-efficiency by optimising logistics costs as
the new manufacturing hub will bring FFB closer to its customers in Klang Valley. Its
current processing facilities are located in Muadzam Shah, Pahang, and Larkin, Johor.
? In addition, we believe that building a manufacturing hub on this land has its perks, as
the land has been granted HALAL MALAYSIA status by the Halal Industry Development
Corporation. This will allow FFB to apply for Halal incentives for Halal industry
manufacturers, which could include exemption from income tax for certain years,
exemption from import duty on raw materials, etc.
? Our channel checks reveal that global and prominent brands such as Coca-Cola,
Kellogg’s, Ajinomoto (Malaysia) Bhd and Dutch Lady Milk Industries Bhd are existing
manufacturers and/or warehouse owners in the area.
Reiterate Add
? With no surprises from the announcement, we keep our FY23-25F EPS estimates and
Add call with TP of RM1.83 (28x CY23F P/E, in line with target CY23 P/E of domestic
dairy-based beverage manufacturers). We like FFB as a proxy for the growing demand
for fresh milk-based goods in Asia, backed by its strong growth profile (FY22-25F EPS
CAGR of 22.6%). Re-rating catalysts: better-than-expected sales volume and margin
expansion. Downside risks: surge in input costs, weaker-than-expected sales volume.