KUALA LUMPUR: Johor-based vegetable wholesaler Farm Price Holdings Bhd financial year 2023 to 2026 (FY23-26) earnings is expected to grow at a strong compound annual growth rate (CAGR) of 33 per cent.
Rakuten Trade said this is underpinned by the transition to 24-hour shifts to meet escalating demand, the expansion of value-added services, particularly targeting the Singapore market and the expansion of the Senai Centralised Distribution Centre.
The firm added that Farm Price boasts a healthy balance sheet, with gearing levels falling from 2.66 times in FY20 to 0.53 times in FY23, a trend expected to be sustained post initial public offering (IPO).
"The fresh vegetable industry is integral to Malaysia's food security agenda, directly impacting sustenance, health and cost of living.
"In 2022, the industry contributed 8.9 per cent to the gross domestic product of the agriculture sector, with food and non-alcoholic beverages comprising of 29.8 per cent of the CPI weight in 2023.
"With a market size of RM7.6 billion in 2023, the industry presents significant growth opportunities, supported by governmental focus and consumer demand for fresh produce.
"As such, Farm Price stands to benefit from this favorable industry landscape," Rakuten Trade said in an investment idea note.
As part of its expansion strategy, Farm Price is undertaking the construction of new facilities to enlarge its central distribution centre which will enhance its built-up area from 78,721 sq ft to 149,548 sq ft, scheduled for commencement in the first quarter of 2026 (1Q26).
Rakuten Trade said the new production facilities will expand its floor space by 90 per cent, thereby enhancing cold room capacity by about 35 per cent, positioning the company for substantial growth in the foreseeable future.
The firm also said Farm Price distinguishes itself via a wide variety of fresh vegetables coupled with value-added services.
Currently, Farm Price operates about 980 stock keeping units (SKUs) of fresh vegetables, meeting diverse customers' needs.
"The provision of prepacked and fresh-cut vegetables not only caters to convenience but also commands a higher profit margin," it noted.
Farm Price made a strong debut on the ACE Market of Bursa Malaysia on Tuesday, with its shares surging 100 per cent to 48 sen over the IPO price of 24 sen.
The company had raised a total of RM24.5 million from the IPO.
Managing director Tiong Lee Chian said the company's listing will enable it to focus on market development in Singapore by establishing a marketing and sales base.
He noted that the company's total revenue previously was about 25 per cent, and now for the first quarter of 2024, it has increased to 28 per cent.
"We anticipate more sales in Singapore as we are receiving a lot of demand from that country.
"Therefore, we will focus on adding more marketing and sales staff to expand the business in Singapore and hope for better margins," he said.