Farm Fresh's RM200mil placement timely for expansion: TA Securities
KUALA LUMPUR: Farm Fresh Bhd's proposed private placement is expected to strengthen its funding flexibility and support its expansion plans, said TA Securities Sdn Bhd.
KUALA LUMPUR: TA Securities has expressed optimism about Farm Fresh Bhd's upcoming private placement, which they believe will bolster the company's financial resources and bolster its growth plans. Analyst Liew Yi Jiet stated that the proposed placement coincides with Farm Fresh's forecasted capital expenditure of approximately RM200 million for fiscal year 2027.
The funds will facilitate greater financial flexibility, diminish the need for additional borrowing, and bolster the group's regional expansion and capacity-building efforts. Specifically, a significant portion of the capital will be channeled towards Cambodia's dairy processing capacity enhancement and the creation of an integrated dairy farm in Pursat province.
Additionally, RM56.3 million will be allocated to expanding manufacturing capabilities in Larkin, Johor, and developing new products and connected businesses. A further RM50 million will be utilized to acquire an additional 20% stake in The Inside Scoop Sdn Bhd, elevating Farm Fresh's ownership in the ice cream business to an estimated 85% from the current 65%.
This acquisition is expected to be finalized by September 25, 2026, barring any unexpected delays. TA Securities remains cautiously optimistic about Farm Fresh's long-term strategic rationale, with the Cambodia expansion anticipated to improve supply-chain efficiency and lower logistics costs through local milk production and processing.
However, the company's near-term share price performance may be influenced by the final placement price and the percentage reduction from the current market price. On a pro-forma basis, Farm Fresh's net gearing is projected to decrease from 0.89 times to 0.53 times following the completion of the placement, although it is anticipated that earnings per share will experience a 5.5% dilution for fiscal years 2027 to 2029.
Despite this, TA Securities has maintained its "Buy" rating on Farm Fresh, albeit with a revised target price of RM2.75 from RM2.91, accounting for the increased share base.
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