[IPO] Farm Price Holdings

Note: The company's stock price has nearly doubled from RM0.240 of the IPO!

The only “vegetable stock” in Malaysia was favored by many investors after it was listed; however, the vegetable industry still has a high threshold. Why is it that only they have been listed so far, and how can they maintain their competitive advantage after listing at the same time?

The moderators are also very curious about these issues. I hope that after today's article, everyone can have a deeper understanding of this field.

First, the business of Farm Price Holdings Berhad (FPHB, 0304) can be divided into 4 main categories; the first is wholesale fresh vegetables, pre-packaged fresh vegetables (“Prepacked Vegetables”), fresh-cut fresh vegetables (“Fresh Cut Vegetables”), and operating its own retail store in Ulu Tiram, Johor.

In terms of gross profit margin (“gross profit”), the highest profit margin is of course Fresh Cut's processed fresh vegetables (up to 30% to 40%), and generally these vegetables are sold to customers who need to simplify cooking, such as restaurants, nursing homes, or hotels.

For example, FPHB can extract the seeds inside of bitter gourds and sell them in sliced packages. In that case, it's easier for chefs to cook, and nursing homes may require chopped broccoli to make it easier for the elderly to eat.

Well, how about pre-packaged fresh vegetables, like the ones we saw at Hero Mart in Kuala Lumpur that have already been packaged. These stores only need to be placed on the counter to sell them. Relatively speaking, Gross Profit is good.

All of the above can actually be done by purchasing machines and hiring manpower, right?

According to my personal understanding of the FPHB industry, the essence of this industry actually lies in two aspects; supply chain management, and inventory management.

Needless to say, FPHB's two major shareholders are actually from the background of quantity surveyors (“Quantity Surveyors”) in the construction industry, so they are very clear when it comes to accounting (mainly vegetable inventory and prices).

Furthermore, in order to continue in this industry for a long time, it is also very important to determine that there is a stable supply source.

In addition to local farmers, FPHB itself also imports vegetables from 8 other countries (such as Thailand, Vietnam, and China), but the import time is quite unstable. If the “Cold Chain” (“Cold Chain”), that is, if the freshness of vegetables is not managed properly during transportation, then there will be problems with vegetables being damaged and cannot be delivered on time.

Therefore, FPHB does not simply buy vegetables from local regions such as Cameron and then sell them (although the company is also preparing to set up warehouses), but it operates supply chains to Malaysia and Singapore in multiple countries, which is not that easy to do.

Friends working in Pasar should know that the price of fresh vegetables is basically constantly fluctuating (according to local demand and supply), so how to lock in high sales prices depends a lot on the operator.

In addition, if you open the prospectus, you can see that the company's business is concentrated in the Johor region, and this strategy is mainly because fresh cut and prepacked vegetables can be supplied directly to Singapore to earn SGD.

Looking at today's SGD/MYR exchange rate is around 3.488, and the spread here is quite large.

Peers saw that FPHB went public, and it wasn't easy to copy their model. After all, the two founders of this company basically work within the company every day, but at the same time, this also poses a risk of a future heir, which also needs to be noted.

Generally speaking, FPHB's products are in immediate demand. Judging from the prospectus, the company's growth goal is also very clear, which is to continuously expand the Singaporean market (it is understood that the market share should only be around 1%), earn additional processing and exchange rate differences, and at the same time expand warehouses in Johor to store more vegetables.

But one thing to say, the company's stock price has also risen. This article only helps you understand FPHB's business. I don't know what people think of this company?

Photo source: Self-shot

Disclaimers:

The moderator is not a licensed stock analyst, so we don't provide you with any trading advice. If necessary, you can ask a licensed stock analyst or licensed stock broker.

The current status of the moderator is iFAST Capital Sdn. Bhd. He is also the marketing representative of TA Securities Holdings Berhad, and is an independent financial content writer, and does not provide financial consulting services.

At the time of writing this article, or in the short term (within 3 months), the moderators themselves are interested in investing in or already holding the companies mentioned above, unless new factors come up, so it is important for readers to check the independence of this content.

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