This article first appeared in Capital, The Edge Malaysia Weekly on June 22, 2026 - June 28, 2026

FARM Fresh Bhd’s (KL:FFB) share price has fallen almost 25% from its January 2026 peak of RM3, erasing more than RM1 billion in market value. That plunge has revived memories of the margin squeeze in its financial year ended March 31, 2023 (FY2023) that triggered one of the steepest corrections in the dairy producer’s share price since its listing in March 2022.

Back then, soaring dairy commodity prices, freight costs and packaging expenses squeezed its margins as global supply chains reeled from post-pandemic disruptions and the Russia-Ukraine conflict. Investors questioned whether Farm Fresh deserved the premium valuation at its blockbuster listing.

The concerns were understandable. Farm Fresh debuted on Bursa Malaysia with a market capitalisation of RM2.51 billion, trading at about 36 times trailing earnings and roughly 30 times forward earnings — a significant premium over established consumer names such as Dutch Lady Milk Industries Bhd (KL:DLADY) and Fraser & Neave Holdings Bhd (KL:F&N), which typically trade at between 20 and 25 times earnings.

The company eventually proved the sceptics wrong.

As dairy input costs eased and management successfully passed through higher prices, profitability recovered. Earnings rebounded and investor confidence returned. The stock rallied from around RM1 in July 2023 to RM3 in January 2026, tripling in value in less than three years, before paring gains to close at RM2.29 last Thursday.

Today, however, investors are grappling with a different set of concerns. They are no longer questioning the demand for fresh milk but whether Farm Fresh can successfully execute an increasingly ambitious regional expansion strategy without sacrificing profitability.

Despite delivering record annual earnings of RM129.6 million and annual revenue crossing the RM1 billion mark, its 4QFY2026 earnings fell 2% year on year and 13% quarter on quarter even though revenue grew 13% from a year earlier.

The below-expectations results were due to higher operating expenses, unexpected losses from its Philippines operations and delays in the commissioning of its new manufacturing hub in Bandar Enstek.

This led to a few analysts disputing Farm Fresh’s long-term growth prospects.

CIMB Research cut its FY2027 and FY2028 earnings forecasts by between 16.7% and 18.1% to reflect higher cost pressures and start-up losses. Kenanga Research reduced its FY2027 earnings estimate by 7%, while Maybank Investment Bank lowered its earnings forecasts by between 4% and 5%.

Is Farm Fresh experiencing a temporary setback, or are the challenges facing the company fundamentally different this time around?

The answer is far from straightforward.

Faced with earnings pressure that was largely caused by external cost inflation three years ago, Farm Fresh management had limited control over rising dairy commodity prices and global supply chain disruptions.

In contrast, today’s issues stem largely from its own strategic decisions. Its latest FY2026 earnings miss reflects a broader combination of rising operating expenses, start-up losses, project delays and execution risks associated with its expansion strategy.

Part of the latest earnings pressure was linked to higher plastic packaging costs arising from the recent geopolitical tensions in the Middle East. The disruption affected supplies of high-density polyethylene resin used in Farm Fresh’s plastic milk bottles.

Management has responded by implementing targeted price increases of about 3% on selected products in plastic bottles in Malaysia and around 10% for most products in Singapore from June 2026, which it expects will largely offset the higher resin costs.

Farm Fresh remains the dominant player in Malaysia’s fresh milk segment and continues to expand into higher-value categories such as ice cream, butter and other dairy-based consumer products. At the same time, its regional footprint is becoming increasingly important.

Cambodia has emerged as one of Farm Fresh’s fastest-growing markets. Management recently noted that sales there have already surpassed Singapore’s despite contributing only about 3% of group revenue. A new manufacturing facility, initially expected to commence operations earlier this year but now targeted for July, is expected to reduce logistics costs, free up capacity at the group’s Larkin facility and support further expansion in the Indochina region.

Meanwhile, the proposed RM35 million acquisition of Sabah-based Amelia Ice Cream will provide immediate access to more than 3,500 freezers and an established distribution network across Sabah, Sarawak and Brunei, potentially accelerating Farm Fresh’s penetration into East Malaysia.

The strategic rationale is compelling, given that East Malaysia remains one of the few domestic markets where Farm Fresh’s presence is still relatively underdeveloped. Management believes Amelia’s infrastructure could provide a platform not only for ice cream distribution but also for future dairy expansion.

As Farm Fresh enters a period of intense execution, a key question raised by investors is how much that growth will cost.

Over the next 12 months, the company will be pursuing several major initiatives simultaneously, including ramping up its Bandar Enstek central manufacturing hub, scaling its Philippines operations, commissioning a new Cambodia factory, integrating the proposed Amelia Ice Cream acquisition and expanding dairy farming capacity at Muadzam Shah 2.

Each initiative has long-term potential. Collectively, however, they create significant near-term pressure through higher depreciation charges, start-up losses, labour costs and operating expenses.

Kenanga Research estimates that the Bandar Enstek facility alone could weigh on earnings during its first six to 12 months of operation as utilisation gradually ramps up.

To Tradeview Capital chief investment officer Nixon Wong, the recent sell-off in Farm Fresh’s shares is primarily due to recalibrating expectations after a period of exceptional growth, given that its forward price-earnings (PE) multiple has come down to roughly 30 times, from about 37 times previously.

He says investors have started to reassess the premium valuation previously assigned to the stock, as growth has begun to normalise with the emergence of short-term risks, following the exceptionally strong earnings growth recorded in FY2024 and FY2025.

“There was concern that earnings growth may moderate from the exceptionally strong pace seen previously,” he tells The Edge.

Near-term risks include higher raw milk costs, feed prices, logistics expenses and utility costs. Rising competition and weaker-than-expected earnings delivery could also weigh on sentiment.

Potential rerating catalysts include stronger-than-expected earnings growth, successful regional expansion and a faster-than-expected ramp-up of the group’s ice cream business, which is generally regarded as a higher-margin segment.

Even after the recent correction, Farm Fresh has continued to trade at a valuation well above that of most consumer stocks on Bursa Malaysia, at a PE multiple of about 20 times.

According to Wong, Farm Fresh’s premium valuation stems from a combination of stronger earnings growth, powerful consumer branding, regional expansion opportunities, an integrated dairy model and a track record of product innovation.

He notes that the company continues to expand its product offerings beyond fresh milk into categories such as butter and ice cream, particularly the latter, where competitors have yet to establish a similarly strong presence.

“Most companies face de-rating when earnings growth slows. Farm Fresh has to continue delivering on the growth projections expected by the market,” Wong says.

Another key challenge for Farm Fresh is market competition, in view of the entry of larger players into dairy farming.

Wong highlights that Malaysia’s fresh milk market remains relatively underpenetrated and large enough to accommodate multiple players.

“Farm Fresh already has strong brand recognition and shelf presence. The competitive moat may narrow over time if competitors invest aggressively, but the market does not necessarily have to become a zero-sum game,” he says, noting that the major competitor remains Fraser & Neave, given its strong financial resources, extensive distribution network and established consumer brands.

Farm Fresh’s share price decline prompted its co-founder and managing director Loi Tuan Ee to support the shares, acquiring 400,000 shares on June 10 and June 11 at RM2.16 to RM2.18 per share, according to filings with the stock exchange. He now has direct and indirect stakes of 0.058% and 37.308% respectively.

This, perhaps, signals management’s confidence in the company’s long-term prospects.

Other substantial shareholders are the Employees Provident Fund (18.589%) and Kumpulan Wang Persaraan (Diperbadankan) (7.437%).

Analysts remain broadly constructive on Farm Fresh. Of the 14 analysts covering the stock, nine recommend “buy” calls, while four maintain “hold” calls.

Target prices range from RM2.05 by UOB Kay Hian to RM3 by UBS Investment Research, bringing to a consensus target price of RM2.55, implying a modest upside from its last Thursday’s closing price of RM2.29.

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