Yenher Holdings Bhd (Yenher) is a one-stop livestock health and nutrition solutions provider, offering a wide selection of health and nutritional products. The Group plans to increase its capacity by more than 300% to meet the increasing demand. We expect Yenher to register net profit of RM23.6m and RM25.2m for FY21 and FY22 respectively, driven by strong demand. BUY with a target price of RM1.22 based on 14.5x PER (3 years average of closest peers) over FY22 EPS.

At present, Yenher has two manufacturing plants: (i) to produce premixes, complete feed and formulated products; and (ii) to produce biotech animal feed ingredients. In order to cater for the increasing demand for its products, the company is planning to construct a new GMP (good manufacturing practice) compliant manufacturing plant, which will house all the manufacturing activities under one roof, a new R&D center, a warehouse and a new head office. The new plant is expected to be fully operational in 4QCY23. Total production capacity is expected to increase by 370% or 3,240 tonnes per month (2,027 tonnes of remixes, complete feed and formulated products and 1,213 tonnes of biotech animal feed ingredients).

Going forward, Yenher is planning for regional expansion. The company is targeting to penetrate into Myanmar, Bangladesh and the PRC within 24 months, due to the large livestock industry in these countries. Meanwhile, Yenher aims to establish representative offices/branch as well as appoint distributors in the identified markets, depending on the regulation in the particular countries.

Yenher’s financial leverage is manageable with minimal net gearing of less than 1%. We believe the company still has ample room to gear up for additional expansion. Yenher has a dividend policy of 40% payout ratio. Based on our estimates, the company is expected to pay dividend of 3.2 sen and 3.4 sen for FY22 and FY23 respectively translating into yield of 3.4% and 3.6% respectively. Our BUY recommendation is premised on (i) capacity expansion which will boost future earnings; (ii) strong demand of its products; and (iii) decent dividend yield.

Source: Rakuten Research - 9 Sept 2021