Yenher Holdings Berhad (“Yenher”) (KLSE: YENHER) is a Malaysian animal health and nutrition products manufacturer. 

Since its listing on the Main Market of Bursa Malaysia on 15 July 2021, shares of the group have been trading below its initial public offering (IPO) price of 95 sen. 

If you are looking at Yenher with interest, here are 8 things to know before you invest.

1. Principal activities

Yenher is principally involved in the manufacturing and distribution of animal health and nutrition products. 

Under its manufacturing segment, the group manufactures premixes, complete feed, formulated products and biotech animal feed ingredients mainly for the poultry and swine sub-sectors. 

On the other hand, its distribution segment focuses on the distribution of feed additives, vitamins, minerals, veterinary pharmaceuticals, veterinary vaccines, farm equipment, livestock reproduction products and companion animal products that cater for poultry, swine, ruminants, aquaculture and companion animal subsectors. It also distributes raw materials and commodities such as cereals and grains used in producing animal feed.  

To complement and support the sales of its manufactured and distribution products, Yenher provides value-added diagnostic and material analyses services to its customers. The group is capable of performing an array of tests at its in-house laboratory ranging from microbiological testing, mycotoxin detection, serology tests, antibiotic sensitivity tests, polymerase chain reaction tests for disease identification, near-infrared spectroscopy to high performance liquid chromatography tests. These analyses allow it to assess the performance and stability of its products consumed by its customers’ livestock which also form part of its quality control testing. 

Yenher has a team of veterinarians located throughout Malaysia who provide complimentary consulting services ranging from farm management to disease diagnoses to development of animal health programmes such as farm bio-security measures, vaccination programmes and animal nutrition feeding plans to its customers. 

The group’s principal activities are depicted in the diagram below:

(Source: IPO prospectus)

The chart below sets out the group’s revenue by business segments for the financial year ends (FYEs) 2017 to 2020:

(Source: IPO prospectus)

2. Principal market and customers

Yenher’s principal market is in Malaysia which contributed approximately RM163.51 million or 91.31% of its revenue for the financial year ended (FYE) 31 December 2019, while the remaining RM15.56 million or 8.69% was contributed by its export markets which include Indonesia, Brunei, Hong Kong and Pakistan. 

For the FYE 31 December 2020, Malaysia remains its largest market contributing approximately RM181.91 million or 89.77% of its revenue for the year, while the export markets contributed approximately RM20.72 million or 10.23%. 

Its customers are mainly farmers, feed millers as well as livestock integrators operating in the poultry and swine sub-sectors. Livestock integrators are commercial farming companies with integrated operations which are involved in both upstream and downstream activities within the relevant livestock sub-sector. Through its range of products and services, the group work with its customers to ensure the health of their livestock and livestock production are taken care of. 

3. Utilisation of IPO proceeds

Yenher expects to use the gross proceeds of approximately RM61.21 million raised from the IPO in the following manner: 

(Source: IPO prospectus)

4. Future plans and strategies 

Yenher’s future plans and strategies are as follows:

a) Construction of a new GMP-compliant manufacturing plant

As both its existing manufacturing plants are operating at a production utilisation rate of 100%, Yenher intends to construct a new GMP-compliant manufacturing plant to cater to the increasing demand for its products. The new manufacturing plant will house all of its manufacturing activities under one roof and will include the following:

  • Factory A: A factory to manufacture premixes, complete feed and formulated products, which will include a warehouse;
  • Factory B: A factory to manufacture biotech animal feed ingredients;
  • Office building: New office space and a R&D center for R&D activities as well as diagnostic and material analyses; and
  • Canteen. 

Factory A will enable it to increase its monthly production capacity of premixes, complete feed and formulated products from 573 tonnes to about 2,600 tonnes, whereas Factory B will enable it to increase its monthly production capacity for its biotech animal feed ingredients from 287 tonnes to about 1,500 tonnes. 

Barring any unforeseen circumstances, Yenher expects the new manufacturing plant to be fully operational in the fourth quarter of 2023. Thereafter, it will apply for GMP certification for both factories and this process is expected to take approximately six months from the date of application.  

b) Expansion of business into new markets

Yenher intends to expand its business into new markets either through the establishment of representative officers or branch offices, or appointment of distributors in Myanmar, Bangladesh and PRC which are identified as potential markets to expand its business. The group expects to expand its business into these countries within 24 months from the date of listing. 

c) Expansion of product range

Yenher will continue to develop and/ or introduce new products under its manufacturing and distribution segments. This will serve to strengthen its product portfolio as well as enable it to meet the changing demands of the livestock industry. The group is currently working on a new probiotic additive that is currently in the prototype testing stage. It expects the whole process to take two to three years to complete as it is required to conduct farm trials to determine the efficacy of the product. 

5. Market revenue and growth forecast

The table below shows the market revenue and growth forecast for the animal health and nutrition industry in Malaysia from 2015 – 2025.

(Source: IPO prospectus)

Going forward, the animal health and nutrition industry in Malaysia is anticipated to remain resilient due to its continued dependency on the livestock industry. The animal health and nutrition in industry in Malaysia is projected to grow tom RM2.18 billion in 2020 to RM2.69 billion in 2025, registering a compound annual growth rate (CAGR) of 4.3%.

6. Key risk factors

The following is a summary of key risk factors that Yenher faces in its business operations.

a) Its business is dependent on livestock industry

Yenher’s business operations are highly dependent on the performance of the livestock industry, which in turn is affected by, among others, change in world population, change in consumers’ dietary preferences and habits as well as disease outbreaks. Any significant drop in demand for livestock, especially for poultry and swine, would adversely affect the demand for its products.

b) Its manufacturing operations is dependent on the supply of workers 

Currently, Yenher hires 47 foreign workers from Bangladesh, Nepal and Myanmar representing 34.05% of its total workforce who are involved in the production, warehousing and delivery duties. However, pursuant to the requirements imposed by the Malaysian Investment Development Authority on its manufacturing license, the group is required to employ at least 80% Malaysia in its total workforce by 31 December 2022, failing which, its license may be revoked. 

c) Operations may be adversely affected by the volatility of prices and interruption in the supply of raw materials 

During the last four FYEs 2017 – 2020, the cost of raw materials and distribution products represented 94.80%, 94.54%, 93.92% and 93.85% of its total cost of sales respectively. The prices of raw materials which the group distribute and use for the production of its own in-house manufactured products, may be affected among others, by market demand and supply, change in government policies or other external circumstances.

In addition, the animal health and nutrition industry is also exposed to fluctuations in crude oil prices as selected petrochemicals such as benzene, cellulose acetate and propylene glycols are raw materials used in the production of veterinary pharmaceutical and biological products. As such, any increase in crude oil prices could adversely impact the operations and profit margins of manufacturers and suppliers of these veterinary pharmaceutical and biological products, and may cause an upward pressure to their selling price. 

If Yenher is not able to anticipate any future abrupt price hikes or any future disruption to its supply chain, it may not be able to effectively pass on the increased procurement costs to customers or meet its customers’ demand.

7. Substantial shareholders 

Post IPO, the Cheng/ Theoh family collectively own 59.77% of Yenher. 

(Source: IPO prospectus)

The profiles of its substantial shareholders are as follows:

  • Cheng Mooh Tat –  Mr. Cheng Mooh Tat is the group’s non-independent group managing director. He is responsible for overseeing the overall business direction and strategies of the group. 

  • Cheng Mooh Kheng – Mr. Cheng Mooh Kheng is the group’s non-independent executive director and is primarily responsible for overseeing the sales and marketing strategies of the group.
  • Cheng Mooh Chye – Mr. Cheng Mooh Chye is the group’s substantial shareholder. He currently serves are the director of Yenher Biotech (a wholly owned subsidiary) and is responsible for overseeing the warehousing operations of the company.

    Mr. Cheng Mooh Chye is the brother of Mr. Cheng Mooh Tat and Mr. Cheng Mooh Kheng, and is the brother-in-law of Madam Theoh Mooi Teng.

  • Theoh Mooi Teng – Madam Theoh Mooi Teng is the group’s Non-Independent Executive Director. She is responsible for overseeing the group’s accounting and finance departments, as well the group’s purchasing, shipping, administration and human resource functions. She is also the spouse of Mr. Cheng Mooh Tat. 

8. Financial Highlights  

The following table sets out the key financial highlights of the group for the financial years indicated.

(Source: IPO prospectus)

Yenher is a profitable company. In addition, the group has been able to consistently maintain its gross profit margins and profit after tax margins above 24.00% and 10.00% respectively, which demonstrates its ability to control business costs. 

It is a prudently managed company since its gearing ratio is only at 0.01 times as at 31 December 2020 and the group should have the capabilities to weather any financial downturn or recession. Furthermore, it intends to recommend and distribute dividends of at least 40% of its annual audited profits while leaving adequate reserves for the future growth. 

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