Yenher Holdings Bhd (YENHER) that is making its debut on the Main Market today is a one-stop animal health and nutrition solutions provider. The company via its IPO proceeds will construct new manufacturing facilities to boost capacity by 400%, to cater for venturing into new markets and product range expansion. BUY with a target price of RM1.22 based on 14.5x PER FY22 as per 3-year average valuation of closest peers.

Established since 1991, YENHER has grown by leaps and bounds from a sole distributor to a manufacturer and distributor of animal health and nutrition products serving farmers, feed millers and livestock integrators operating in the poultry and swine livestock sectors. YENHER’s business is also complemented by valueadded diagnostic and material analyses services and other complimentary services. Under the helm of experienced management of over 25 years, YENHER offers a wide range selection of animal health and nutrition products coupled with value added services, thus allowing YENHER to serve as a one-stop solution provider.

YENHER has an in-house R&D team with strong focus on product formulation by having successfully developed its first biotech animal feed ingredient in 2018. In FY2020, Malaysia remains the largest market (90% sales contribution) and others from Indonesia, Brunei, Hong Kong and Belgium. 56% of revenue is generated from manufacturing division followed by 44% from distribution business. In term of revenue for FY2020, YENHER has a market share of 9.3% in the animal health and industry in Malaysia.

Bulk of the proceeds (RM31m or 50.6%) is earmarked to construct a new GMP-compliant manufacturing plant, housing all manufacturing activities under one roof. Upon completion of the manufacturing plant by 2023, monthly capacity of premixes, complete feed and formulate products will be enhanced by 353.8% from 573 tonnes to 2,600 tonnes. Production capacity of biotech animal feed ingredients will be boosted by 422.6% from 287 tonnes to 1,500 tonnes per month. This will cater for YENHER’s penetration into new markets such as Myanmar, Bangladesh and China due to their large livestock industries. With the new manufacturing plant in place, the group will continue to expand product range via its proven in-house R&D capabilities and is presently working on new probiotic additive.

Balance sheet is healthy with very minimal gearing ratio and cash holding of RM24.7m. YENHER has a formal dividend policy of 40%, translating to a projected dividend yield of 3.3% and 3.6% in FY21 and FY22. We forecast EPS growth of 6% and 7% for FY21 and FY22 respectively benchmarking on industry expected CAGR.

Source: Rakuten Research - 15 Jul 2021