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Farm Price Holdings Berhad’s 85.4% Potential Upside

With two decades of unwavering commitment to wholesale fresh vegetable distribution, Farm Price Holdings Bhd (FPHB) stands as a pillar of reliability in the staple food industry. Positioned within the crucial narrative of food security, analysts anticipate FPHB to ride the wave of growth in the Johor-Singapore corridor. Projections for FY24-25f showcase robust bottom-line growth of 16.6-25.1%, reaching RM10.1-12.7 million, buoyed by strategic operational expansions to meet escalating customer demands. Analysts have assigned a fair value of RM0.445 for FPHB, underpinned by a forward P/E of 15.7x aligned with peers in the Packaged Foods sub-industry.

Addressing current capacity constraints, FPHB is swiftly adapting to surging demand, evident in its cold room facilities operating at over 95% capacity. Short-term measures, including increased processing shifts and flexible infrastructure utilization, will ensure timely delivery of fresh produce, translating into significant top and bottom-line growth.

Expansion initiatives for exponential growth include the utilization of IPO proceeds to expand SCDC, augmenting floor space by 90% by FY26. This strategic move will bolster operational efficiency, adding 54k sqft to operational areas, enhancing cold room capacity by 35%, and accommodating up to 40k pallets annually, laying a robust foundation for sustained growth.

Despite challenges in FY20-22, including margin pressure due to fixed pricing contracts amidst rising vegetable costs, FPHB anticipates stable margins akin to FY23 levels, with an optimistic outlook for normalized pricing dynamics.

Leveraging its track record, FPHB enjoys a competitive edge in securing new customers, particularly in Singapore. Operating from Malaysia, FPHB leverages lower production costs and SCDC’s strategic location to ensure freshness and prompt delivery, outshining its Singaporean counterparts. Ongoing discussions with potential clients underscore FPHB’s prowess in leveraging its reputation and competitive advantages for continued market penetration in Singapore.

In essence, FPHB’s journey as a staple food provider epitomizes resilience and growth potential, poised to capitalize on emerging opportunities and fortify its position in the dynamic food distribution landscape.

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