Malaysia's Farm Fresh seeks to raise RM1b in March IPO

[KUALA LUMPUR] MALAYSIAN dairy producer Farm Fresh aims to raise RM1 billion (S$323.3 million) from its initial public offering (IPO) in March, which will be the largest listing in the country since June 2021.

The IPO involves an offer for sale of up to 520.2 million  existing shares and a public issue of 223 million new shares,  based on the initial retail price of RM1.35 per share.

After the listing on Bursa Malaysia’s main market on March 22, Farm Fresh’s top executives said at its IPO prospectus launch on Monday (Feb 28) that the company is expected to have a market capitalisation of RM2.5 billion.

Farm Fresh said it has already secured a record number of cornerstone investors for a Malaysian IPO – 30 in total – and these include the Employees Provident Fund, Maybank Asset Management, AIA and  JPMorgan Asset Management (Singapore). These investors will take up to 80 per cent of  the institutional offering tranche under the IPO.

About RM301 million of the proceeds will be used to establish a new manufacturing hub, a dairy farm, and an integrated processing facility in Malaysia, expand a production facility in Australia, and for regional expansion.

Loi Tuan Ee, the Group managing director and chief executive officer, said the company is “well positioned to capitalise on the sustained strong consumer demand” for fresh milk products, in addition to addressing the “insufficient” local milk production today. 

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“Post-listing, Farm Fresh will endeavour to execute our plans to continue gaining market share and growing our sales in Malaysia and abroad,” he said. “By optimising our growth, we endeavour to reward our shareholders through the adopted dividend policy that targets to return 25 per cent of our annual earnings to shareholders.”

According to Loi, the company has a stronger affinity with its brand name in Malaysia, with “spill overs” in Brunei, Singapore and Indonesia. 

While there are plans to export to Hong Kong at some point, there are no intentions for the company to venture into other parts of China at the moment, he added. 

In response to a question from The Business Times on Farm Fresh’s growth plans for Singapore, Loi said that the brand has been doing very well organically in the country, and they will be looking into establishing a stronger brand presence in the Republic after its IPO.

“We know we have a good product and it’s all about positioning ourselves there. Strategically, we are very close in competition with other dairy brands in Singapore, which has mostly imported milk,” he said.

Loi also shared that Farm Fresh is planning a plant rationalisation after its listing. “Once our Taiping plant (in Perak)  is up and running this year, (it) will free up  capacity in the Southern plant in Johor, which will feed back into Singapore, a market we want to focus on,” he said.

Farm Fresh, which has been in operation since 2009, has demonstrated fairly strong financial performance over the years. 

It reported a profit after tax of RM36.2 million in the financial year ended March 31, 2021, which represented a compound annual growth rate (CAGR) of 14.9 per cent compared to the RM27.4 million in FY2019. From FY2019 to FY2021, the CAGR for revenue was 65.9 per cent – from RM178.2 million to RM400.5 million.

Applications for the public issue portion are now open and will close at 5pm on March 8.