KUALA LUMPUR: Public Investment Bank (PublicInvest) research has attached a fair value of 30 sen to Johor-based vegetable wholesaler Farm Price Holdings Bhd, a company set to debut on the ACE Market of Bursa Malaysia Bhd on May 14, 2024.
The fair value represents a 25 per cent premium to the company initial public offering (IPO) price of 24 sen.
The investment bank determined the fair value by applying an 11 times price-to-earnings (PE) ratio to the projected earnings per share (EPS) of 2.7 sen for the financial year 2025 (FY25).
"Since Farm Price's competitors are private entities not listed on Bursa Malaysia, we have compared the company to the average of the Bursa Malaysia Consumer Product Index."While the index's average price-to-earnings (PE) ratio is 16.3 times, we're assigning a 30 per cent discount to Farm Price due to its smaller market capitalisation," it said.
PublicInvest said it determined a fair value of 30 sen based on an 11 times projected earnings per share (EPS) for FY25, which indicated a potential upside of 25 per cent.
"We believe this valuation is justified given Farm Price's anticipated double-digit earnings growth," it added.
PublicInvest research expects Farm Price's core net profit to increase by an average of 18 per cent between the financial years 2024 and 2025 (FY24-FY25).
This growth is attributed to improved economies of scale, expansion into new geographical markets, and enhancements to the supply chain facilitated by the commencement of its new distribution centre.
"While Farm Price's existing facility is running at full utilisation, we believe that the group's future growth will be supported by the additional distribution centres in Cameron Highlands and Nilai, which are expected to commence in the fourth quarter of 2024 (4Q2024)," it said.
The investment bank said Farm Price has the capability to boost its production capacity by operating additional processing shifts and conducting extra delivery trips if necessary.
Farm Price's expansion will be fuelled by the construction of new operational facilities in Senai, Johor, and the expansion of value-added processing areas.
PublicInvest said investments in machinery, equipment, transportation fleet expansion, establishing additional regional distribution centres, and opening a sales and marketing office in Singapore are also key factors driving the company's growth.