Dairy producer Farm Fresh surges in Kuala Lumpur trading debut

[HONG KONG] Malaysian dairy producer Farm Fresh jumped in its trading debut in Kuala Lumpur, following the South-east Asian country's largest initial public (IPO) offering since July.

The shares traded as high as RM1.81, after being sold at RM1.35 each. The company and shareholders raised about RM1 billion (S$322 million) in an offering that lured a record 30 cornerstone investors including Abrdn and Franklin Templeton Asset Management (Malaysia).

The firm, which has a unit of sovereign wealth fund Khazanah Nasional among its investors, is reviving the IPO market in Kuala Lumpur at a time of slow activity in traditional venues due to rising interest rates and Russia's invasion of Ukraine. It's the third company to list in the Bursa Malaysia this year and the largest since CTOS Digital more than 8 months ago.

The IPO allowed "investors to have exposure in defensive or non-cyclical stocks amid prevailing market volatility with the escalating Russia-Ukraine tensions and rising interest rate atmosphere", analysts at JF Apex Securities wrote in a note before the shares started trading.

Starting out producing dairy products from 60 cows imported from Australia, Farm Fresh had expanded to a network of more than 800 home dealers and 38 regional stockists as of last year, according to its website. It controls 18 per cent of Malaysia's ready-to-drink dairy market.

The company is set to get RM301 million from the sale. It plans to use the money to build a manufacturing hub, a dairy farm and processing facility in Malaysia as well as boost production in Australia and elsewhere in South-east Asia.

"We like Farm Fresh for its strong market presence in Malaysia's dairy industry, local and regional expansion plans. The company has a dividend policy of 25 per cent," Ronnie Tan, an analyst at Mercury Securities wrote in a note prior to the debut giving a subscribe recommendation on the shares.

CIMB Investment Bank, Maybank Investment Bank and Credit Suisse are joint global coordinators in the IPO. BLOOMBERG