• Butterfield FB Berhad is a homegrown B2B beverage ingredient manufacturer specialising in coffee and tea extract powder blends, principally involved in the formulation, blending and packing of customised beverage ingredients for F&B manufacturers and other business end users, complemented by its food ingredient and instant beverage premix trading business, growing export footprint across Asia and the Middle East, and expanded manufacturing capacity comprising two 4,095 MT coffee and tea extract lines and a 312 MT matcha line.
• We project core PATMI to expand at a three-year CAGR of 16.3% to reach RM33.4m, RM38.4m and RM47.8m respectively. This growth is underpinned by (i) higher sales volumes from the ramp up of newly added manufacturing capacity, (ii) growth from both existing and new customers alongside overseas expansion, and (iii) operating leverage as utilisation improves across its enlarged production footprint, with the planned 4th manufacturing line expected to provide an additional 4,095 MT of annual capacity over the longer term.
• We assign a fair value of RM0.63 per share for BFIELD, indicating a 31.3% upside from the IPO price of RM0.48. Our valuation is derived by ascribing a target P/E multiple of 14.0x to mid-FY28f EPS of 4.49 sen.

Investment highlights

Specialised B2B beverage ingredient manufacturer with sticky customer relationships. BFB is a specialised B2B beverage ingredient manufacturer focused on coffee and tea extract powder blends, positioned to benefit from rising demand for convenient and customised beverage solutions. Its portfolio spans 98 coffee and 53 tea formulations, demonstrating broad formulation capabilities across customer applications. Beyond manufacturing, BFB offers 315 food ingredient SKUs across Malaysia, Cambodia, China and Thailand, covering dairy and non-dairy products, food additives, cocoa, coffee and tea related powders, and plant derived products, alongside 55 instant beverage premix SKUs across Malaysia and Thailand, including instant coffee, tea and cocoa premixes. The Group has also built long standing customer relationships, with Aik Cheong Group contributing 16.6% of FY26 revenue after 17 years of engagement. We believe its formulation depth, product breadth and established customer relationships underpin customer stickiness, as switching suppliers would require replicating customers’ formulations, taste profiles, consistency and quality specifications.

Capacity expansion offers a clear runway for volume growth. BFB currently operates two coffee and tea blending lines with combined annual capacity of 8,190 MT, alongside a 312 MT dedicated matcha line. The second coffee and tea line commenced operations in January 2026, while the matcha line started in February 2026. Our forecasts assume total manufacturing capacity rises from 5,538 MT in FY26 to 8,502 MT in FY27 and FY28, before increasing to 10,891 MT in FY29 on a prorated contribution from the fourth line and reaching 12,597 MT upon full commissioning. The expansion is supported by RM15.2m of IPO proceeds earmarked for the Bukit Minyak Premises, comprising RM12.5m for construction and RM2.7m for machinery and equipment, with the enlarged facility able to accommodate the fourth manufacturing line. We see utilisation and sales execution as the key variables determining how quickly this capacity translates into earnings, rather than capacity alone.

Matcha adds a new avenue for premiumisation and customer wallet share. BFB commissioned its dedicated matcha manufacturing line in February 2026, with annual capacity of 312 MT and automated packing capabilities. Management has identified expanding tea extract powder blend sales, particularly matcha formulations, as a key growth strategy over the next 24 months. We see matcha as strategically relevant beyond its initial revenue contribution, providing BFB with an avenue to participate in premium tea applications and deepen wallet share among existing F&B customers while diversifying its historically coffee weighted manufacturing mix.

Margin expansion and operating leverage support earnings growth. BFB's GP margin expanded from 18.8% in FY23 to 21.7% in FY26, while PAT margin improved from 9.7% to 12.9% over the same period. FY26 also saw manufacturing GP margin improve to 19.9% from 17.7%, alongside 15.9% growth in manufacturing revenue to RM212.6m, indicating that margin expansion is no longer solely dependent on the higher margin trading segment. We expect further operating leverage as the newly installed capacity matures, with our earnings growth thesis underpinned by a combination of higher sales volumes, better capacity utilisation and a progressively richer product mix.

Strategic M&A provides an additional growth option beyond organic expansion. BFB has allocated RM13.0m, equivalent to 18.1% of gross IPO proceeds, towards strategic investments, mergers and acquisitions that complement its existing operations, diversify its product offering and strengthen its competitive position. Management has specifically highlighted potential acquisitions of instant beverage premix brand owners and manufacturers, which could enhance product capabilities, expand premix capacity and improve value chain integration. We view this as a potential second leg of growth beyond the current manufacturing expansion, although we have not assumed meaningful M&A contribution in our base case given the absence of an identified target. Successful execution would therefore provide a potential re-rating catalyst for BFB.