Yenher’s FV at RM1.19 per share ahead of its listing

by AZALEA AZUAR / pic source:

MAIN-MARKET bound Yenher Holdings Bhd has been given a fair value of RM1.19 per share ahead of its listing to raise about RM61.2 million. 

Public Investment Bank Bhd (PublicInvest) noted that the valuation was derived based on a 15 times price-to-earnings (PE) multiple to its financial year 2022 forecast (FY22F) earnings per share of 7.9 sen. 

“We are ascribing a circa 30% discount to Bursa Malaysia Consumer Products and Services Index’s PE multiple of 20.9 times. 

“We believe the discount is justifiable on account of its smaller market cap compared to other consumer-related players in the market,” PublicInvest stated in a report yesterday. 

Yenher, mainly involved in the manufacture and distributorship of animal health and nutrition products, is scheduled to list on July 15, 2021, with an expected market value of RM285 million. 

The IPO would comprise the public issuance of 64.4 million new shares and an offer-for-sale of 41.8 million shares. 

PublicInvest said Yenher’s future prospects remain optimistic as the company intends to venture into new markets and expand its product range. 

The investment bank wrote Yenher’s growth also depends on the construction of a new good manufacturing practice-compliant manufacturing plant. 

The group plans to use RM31 million, or 50.6% of its IPO proceeds on the new manufacturing facility, new machinery and equipment purchase (RM9.7 million; 15.9%), and working capital (RM16.7 million; 27.3%). 

The completion of the plant would house all its manufacturing activities under one roof and it is expected to begin operation in the fourth quarter of 2023. 

“Upon completion of the factories, Yenher’s monthly production capacity of premixes, complete feed and formulated products will increase by approximately 353.75%, from 573 tonnes to about 2,600 tonnes, while the group’s monthly production capacity for its biotech animal feed ingredients will increase by approximately 422.65%, from the 287 tonnes to about 1,500 tonnes,” the research team said. 

Yenher eyes new markets in Myanmar, Bangladesh and China due to their large livestock industries and referrals from the group’s contacts. 

The expansion is expected to be executed within 24 months from the listing. 

The group is also currently working on a new probiotic additive for the swine and poultry subsectors and also improving the formulation of its in-house products such as ‘Yenmix®’, ‘YenPalm RH®’ and ‘YenSoy®’ to meet customer and livestock demands. 

The group’s growth would also hinge on product variation into veterinary technical services, supported by in-house manufacturing and research and development strength and experienced management. 

However, PublicInvest Research noted that Yenher would have to compete with many domestic product manufacturers, distributors and subsidiaries of international product manufacturers. 

Yenher is also mostly dependent on foreign workers from Bangladesh, Nepal and Myanmar, representing approximately 34% of the group’s total workforce. 

The group may risk its license if it does not employ 80% of Malaysians in its total workforce by Dec 31, 2022. 

Yenher would also face shipping disruption and fluctuation in shipping and freight rates since a significant portion of its supplies are imports, and thus affected by foreign exchange. 

Yenher recorded a revenue of RM202.6 million in FY20, which was 9.3% of Malaysia’s animal health and nutrition industry revenue. 

“The animal health and nutrition industry in Malaysia is projected to grow from RM2.18 billion in 2020 to RM2.69 billion in 2025, registering a compound annual growth rate of 4.3%,” the report noted.