F&N leases RM18.5 mln land to set up first dairy production plant in Cambodia

KUCHING: Fraser & Neave Holdings Bhd (F&N) through its wholly-owned subsidiary, F&N Food (Cambodia) Co Ltd, has entered into a lease agreement with Suvannaphum Investment Co Ltd for the lease of 7.954 acres of industrial land at Suvannaphum Special Economic Zone for a total lease consideration of RM18.5 million for a term of 50 years.

The lease agreement was signed on Feb 15 and the transaction is expected to be completed in the second half of 2024 (2H24).

The land has been earmarked to build a manufacturing facility for dairy products, especially sweetened beverage reamers in can and pouches.

This will be F&N’s first production facility and Cambodia and its setup cost is estimated to be at around RM179.5 million and the plant is expected to commence operations in 1Q26.

Overall, the development has been well received by market analysts with researchers at Midf Amanah Investment Bank Bhd’s research arm, Midf Research, expressing their optimism that the development will allow F&N to further strengthen its overall business.

“We appreciate the strategy of establishing a new manufacturing plant closer to the market to reduce product delivery time and logistics costs.

“Note that the group’s Teaport brand is the number one condensed milk brand within Cambodia, and the product is exported from Thailand operations to Cambodia,” said the research arm.

“We also like the strategic location of the land situated within the Suvannaphum Special Economic Zone, which offers convenient access to distribution warehouses, dry ports, and bonded warehouses,” they added.

Midf Research also pointed out that while the lease consideration of RM18.5 million and estimated setup cost of around RM179.5 million is expected to be funded through internally generated funds, it will be unlikely to have a significant impact on F&N’s balance sheet.

“Post-completion of the lease consideration, we expect the group to maintain its net cash position with a slight decline in financial year 2024 forward (FY24F) net cash to market cap, from 3.5 per cent to 3.3 per cent.

“On the other hand, we also anticipate minimal impact on the balance sheet of the setup cost of the new production plant if funded internally.

“We expect the group to maintain a net cash position with a net cash/market cap ratio of 1.8 per cent if the setup cost is funded internally,” they said.