Sunday 01 Oct 2023
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This article first appeared in The Edge Malaysia Weekly on October 4, 2021 - October 10, 2021

KHAZANAH Nasional Bhd-backed Farm Fresh Bhd has finally put into motion a long-held plan for a Main Market listing on Bursa Malaysia.

The company, which recently changed its name from The Holstein Milk Company Sdn Bhd (THMC) to reflect the popular brand of dairy products that it sells, is understood to have submitted its initial public offering (IPO) application to the Securities Commission Malaysia late last week.

The draft prospectus could be out for public exposure as early as this week, according to a source familiar with the matter. The listing, set to be one of the more sizeable in recent times, is expected to take place within the first half of next year.

“It’s expected to have a market capitalisation of over RM2 billion,” another source tells The Edge.

CIMB Investment Bank is the principal adviser for the IPO exercise. The bank, together with Maybank Investment Bank and Credit Suisse, are joint global coordinators and joint bookrunners for the deal.

The last major IPO was that of CTOS Digital Bhd in July, which raised RM1.2 billion from its Main Market listing, the biggest so far this year.

Farm Fresh is 30%-owned by sovereign wealth fund Khazanah via the latter’s investment vehicle, Agrifood Resources Holdings Sdn Bhd.

Other shareholders of Farm Fresh are Rainforest Capital Sdn Bhd (46.67%) and Farmchoice Foods Sdn Bhd (23.33%). Farm Fresh founder and CEO Loi Tuan Ee, 57, and his family are shareholders in both these companies, along with others.

Johor-based Farm Fresh is an integrated dairy farming player whose products are sold in Malaysia and Singapore. Talk of an IPO first emerged in the market in August last year after Bloomberg reported that the company’s shareholders were considering such an exercise.

A company search by The Edge shows that Farm Fresh’s revenue has grown strongly over the years, from RM54.94 million in the financial year ended March 31, 2016 (FY2016), to RM303.07 million in FY2020. Over the same period, its net profit grew from RM7.65 million to RM34.38 million.

In FY2020, net profit grew 25.2% year on year, on the back of a 67.3% expansion in revenue. Return on equity improved to 18.2% from 17.2% in FY2019.

The company has yet to pay out dividends. Everyone will be keenly watching if it will have a dividend policy going forward.

Earlier, in April, Malaysian Rating Corp Bhd (MARC) assigned a preliminary rating of “AA-IS” to Farm Fresh’s RM1 billion Sukuk Wakalah programme, with a stable outlook.

The rating agency noted that Farm Fresh — then known as THMC — had a healthy domestic market share of 15.6% in milk products and was the second-largest dairy player in the country as at January. It also had a dominant 36% market share in the fast-growing and premium chilled fresh milk segment as at end-2020. In the ambient milk segment, the company had doubled its market share to 8% last year, within two years of entry.

According to MARC, Farm Fresh has sizeable farm land comprising 1,510 acres at home and 2,555 acres in Victoria, Australia. It housed a total of 5,887 heads of cattle in its four Malaysian farms and 2,618 in Victoria as at end-December last year.

“The recent addition of 500 acres to its farm in Muadzam Shah, Pahang, as well as a soon-to-be-completed 828-acre farm and processing plant in Taiping will further strengthen THMC’s market position,” MARC said in April.

Farm Fresh’s cattle breed in its local farms is of the hardy mix-breed Australian Friesian Sahiwal type that is understood to have a stronger resilience to tropical conditions and diseases, and provides relatively higher milk yield than local breeds. In Victoria, it rears the Holstein breed.

Farm Fresh’s total milk output from its farms stood at 24 million litres during FY2020, with the Australian farm accounting for twice the collective output of the Malaysian farms due to higher milk yields, according to MARC.


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