FPHB: Strategic Investments Pave Way for Future Earnings Growth

An investment bank analyst briefing recently concluded with an optimistic outlook for the company’s future earnings trajectory. Despite a temporary dip in recent quarterly performance, the long-term growth prospects are reinforced by strategic expansions and market penetration initiatives.

Performance Review

For the third quarter of FY25, revenue saw a healthy 7.4% year-on-year increase, reaching RM32.9 million, primarily fueled by robust export sales to Singapore. However, core net profit for the quarter experienced a 47% year-on-year decline to RM1.5 million. This reduction was largely attributed to higher administrative expenses, amounting to approximately RM2 million, associated with newly established subsidiaries following the acquisition of Hong Yun Vegetables & Fruits SB. Analysts view this as a short-term impact, with strong fundamentals for future growth remaining intact.

Key Growth Drivers

A significant catalyst for future earnings growth is the nearing completion of the Senai Central Distribution Centre (CDC) expansion. Construction has reached 95% completion and is slated to commence operations in the first quarter of FY26. This facility will substantially increase cold-room capacity from 29,696 pallets to 40,000 pallets, with approximately 90% of this additional space dedicated to meeting the growing demand from Singapore.

The Singapore market presents immense potential. The company continues to demonstrate strong sales momentum in the region, establishing a dedicated sales and marketing office and actively pursuing new customer acquisitions. These efforts have yielded positive results, with Singapore’s revenue contribution rising from 25% in FY23 to an impressive 32% in 9MFY25.

Furthermore, there is a clear strategy for margin enhancement. The company intends to strengthen its value-added capabilities by installing new machinery and equipment at the upcoming CDC. Value-added products, such as fresh-cut and pre-packed vegetables, command premium pricing, contributing to higher gross margins. Exports to Singapore, characterized by a greater mix of these value-added products, also contribute significantly to improved profitability.

The company also benefits from a resilient supply chain, backed by a diversified network of over 100 domestic and international suppliers. This robust network ensures consistent and diversified supply of fresh produce, providing a competitive advantage, particularly during challenging weather conditions that might affect less resilient peers.

Future Outlook

With these strategic initiatives in place, earnings growth is firmly expected to resume in FY26. This anticipated growth will be primarily driven by the increasing contribution from the Singapore market and an improved product mix, leading to margin expansion. The investment bank maintains a positive stance, underscoring confidence in the company’s long-term prospects.