If you haven’t join the paid subscription, you can a community of young and hardworking adults here: https://www.doitduit.com/upgrade

I took the liberty to compile a few key financial data from the annual reports since 2010. As typical for a majority foreign owned company, DLADY historically used to pay out above 90% of profit as dividends.

This makes sense, as the holding company cannot (or doesn’t want to) sell their shares or risk losing control of the company. Thus, the only way they can get realised profits from the business is via the distribution of dividends.

However, the situation changed after DLADY allocated about RM600 mil for expansion. They cut dividends and used the money for capital expenditures instead while only paying out a minimum amount of dividends every year. The rest of the money went into PPE or non-current assets, mainly for the new plant.

So, it stands to reason that once all the major CAPEX had been completed and all borrowings paid back, it is possible for DLADY to start increasing dividends again both as a percent of profit, as well as from potentially increasing profits from higher operational capacity.

Another point worth noting is that, the company started realising accelerated depreciation for the equipment from their old factory, since they decided that none of the old equipment will be brought to their new plant. This artificially suppressed the net profit numbers reported and had no impact on cash flows. As per the AGM, management said that the accelerated depreciation exercise has been completed, and all future depreciation will be priced in at the typical accounting treatment rate.

Another important highlight is that in 2021 they sold off the land and property of their old PJ plant for RM200 million, and recognised a one-off gain of ~RM179 mil. The gain was used to fund their capital expenditure.

The management did not give any dividend guidance other than that they intend to continue distributing dividends every year. DLADY’s management team is somewhat infamous among the investing community for not disclosing much information during the AGM about their operations for fear of competition, much to the frustrations of some shareholders.

With that in mind, I attended the AGM and subsequently was invited in their inaugural shareholder day held in their new plant.

Key takeaways from the site visit: Doubling capacity, with room to double again

DLADY’s 32-acre plant is located at Bandar Enstek, Negeri Sembilan. It’s a new industrial park development by Eco World, located ~15 minutes from KLIA. Surrounding them, many new factories are also being built or have already been completed, e.g. AJINOMOTO (AJI), Kellanova Malaysia (Kellogg’s), Tyson Foods (Supplier to McDonald’s, under MFLOUR), Signature International (SIGN) etc.

DLADY’s facility is a fully integrated one with production facility, distribution center, and wastewater treatment plant. Currently, the buildings occupy ~70% of the total land area, with the vacant space earmarked for future expansion to double their production capacity again.

Currently, the plant’s full operating capacity is double that of their old PJ plant, so with the potential to double it again means that in the long term, DLADY is planning to quadruple their previous operating capacity. However, at the current moment, this new facility is only running at about 60% utilisation rate (which is already higher production than before).

The production lines are 100% automated, from production, filling, packing, and sorting. They claimed that this is the first of its kind in Asia. They also claimed to be using a special kind of packaging (first of its kind in Malaysia) which ensures the quality of the finished goods and the recyclability of the packaging.

They only have 1 worker per line on standby, but the workers themselves are not involved in the production of the goods. For a company generating over a billion ringgit in sales, they only have about 460 employees. This puts them on par with some of the best companies in the world. Honestly I was quite impressed with the robotics involved in the lines.

Out of the 8 lines currently in operation:

• 6 are for producing UHT products;

• 1 for pasteurised products; and

• 1 for soft serve.

2 of the UHT product lines are for producing 200ml milk for the school dairy project by the Ministry of Education. Interestingly enough, DLADY said that their milk is supplied to schools in Sarawak. They also explained that the UHT lines can produce up to 24,000 cartons per hour, while the soft serve line can produce up to 10,000 cartons per hour. Again, the staff were proud to declare that these were the fastest of its kind in the market, which explained their high initial investment costs.

While exact product breakdowns were not given, the staff explained that their major revenue source is from UHT products, followed by pasteurised products, then soft serve.

They mainly sell to retailers, e.g. 99SMART, AEON, Lotus’ etc, and not really Direct to Consumers (DTC) although they do have DTC channels like e-commerce. Recently, they have also started to step up their penetration into the HORECA (HOtels, REstaurants, and CAfes) segment via their Professional line, supplying dairy products and ice cream to cafés and certain restaurant chains.

While not officially confirming this, they hinted that Secret Recipe, McDonald’s, Burger King, Gigi Coffee and CHAGEE are a few of the chains they supply to, although it is not exclusive contracts. They also offer consultancy services for smaller cafes to come up with menus which use their products.

DLADY mainly sells their products locally, while export sales amount to about 5% of total sales. This number was historically restricted due to lack of production capacity so, going forwards, they will be exploring further increasing more exports. Currently, they export to Singapore, Vietnam, Indonesia, Brunei, Maldives, and Hong Kong.

The Distribution Center can store up to 25,000 pallets at a time. Typically, they only keep about 1 month of stock and it is their company practice to fully write off anything more than 4 months old. However, their inventory turnaround is high such that write offs rarely ever occur.

DLADY is the largest purchaser of fresh milk produced in Malaysia, mainly buying from partner farms and via the Department of Veterinary Services’ (DVS) Milk Collection Centres. They are working together with DVS to improve the quality and quantity of milk production amongst the local farmers, by introducing Dutch farming techniques to promote sustainable milk production via their Farmer2Farmer programme. They said that DVS has been very supportive as this is in-line with Malaysia’s goal to be self-sufficient in dairy production by 2030.

Unlike other companies like Farm Fresh, DLADY does not carry out upstream farming themselves and they mentioned that they have no intention to venture there for now. Notably, RHONEMA as I’ve written about before, and also F&N are new entrants into the upstream dairy market.

All the Dutch Lady “Fresh Milk” line is sourced from local milk. They do import milk powder from their parent company to make their other dairy products. Growing the raw fresh milk supply in Malaysia is challenging and a work in progress, but so far DLADY does not foresee any trouble securing enough milk for their production needs as they have various contracts and agreements in place.

ESG Matters

DLADY places heavy emphasis on ESG in their operations in every part of the supply chain. Currently, 100% of all their palm oil, cocoa, and packaging products are certified sustainable. Their partner farms are also practicing sustainable dairy farming.

One impressive feature is that their plant, as big as it is, does not contribute any waste to landfills. All waste are either recycled or made into compost.

Similarly, DLADY does not aim to have maximum profit at all costs in their mission to provide nutrition to everyone. Instead, cost savings are intended to be passed on to consumers, such that DLADY maintains a certain level of profit margins for the business, while at the same time keeping their products affordable for consumers. As much as possible, DLADY intends to limit upwards price adjustments if they can (but will do so if necessary).

Future plans: New plant open up opportunity for growth

DLADY does not expect any more major CAPEX plans for the near future. Currently, their focus is to introduce more product lines and increase the utilisation of the current plant by ramping up production. Potentially, they could look to bring in more brands from their parent company however their focus is very much on Dutch Lady products for now.

DLADY mentions that this new plant is expected to be the Halal Excellence Center for the FrieslandCampina group. This actually opens up a huge market as the global demand for Halal food products is growing, according to some market research, at double digits CAGR over the next decade. The new plant is already Halal certified and audited in Malaysia; and generally Malaysia’s Halal certification is recognised in most countries around the world.

Closing Thoughts and Evaluation: Divergence with Farm Fresh

DLADY is a time tested company in Malaysia with proven track record of profitability for many decades. One thing I like is that the company does not carry out any dilutive activities and they fund any projects by internally generated funds, showcasing strong management of the company and shareholder friendly policies.

The closest competitor to DLADY is no doubt Farm Fresh Berhad (FFB), the darling child of Malaysia’s home grown milk story. Mr Loi, the founder, is a very capable person and spearheaded FFB’s growth from a small scale milk farm and processing plant into what it is today. I actually like FFB’s growth story very much and I find Mr Loi to be a very inspiring person.

Yet, in spite of all FFB’s growth, acquisitions and very favourable tax treatment, FFB is still smaller than DLADY in terms of market share and sales of dairy products. However, FFB, with market cap of almost RM3.3 bil, is worth nearly 2x of DLADY in the market! That’s something to really think about.

DLADY’s financial numbers today and in the recent years look boring. As at 4 August 2025, DLADY is valued at:

It is neither particularly cheap nor expensive, though it is in the lower range of their historical valuations of closer to 30x PE.

However, with the completion of their major CAPEX and impending ramp up of production, we could potentially start seeing significant revenue (and profit) growth again. Another potential driver is resumption of high dividend payouts as per pre-2018 years.

From a consumer point of view, if you go to many of the retail channels, you can actually see that DLADY milk products are now comparable, if not cheaper, to FFB products. The good thing about consumer companies is that you can easily check data points on selling prices with your own eyes.

All in all, I think DLADY is in a good position for the investing community to start paying attention to them again after down-trending and laying low for over 6 years.

I hope this was insightful to you!

If you have any questions (except target prices), feel free to ask in the comments section, or in the group chat and I will try my best to address them.

Stay safe and stay strong investing.

Best Regards,
Ren 🗿
DoitDuit

Disclaimer: This article is in no way financial advice, nor solicitation to buy or sell shares in this company. It is purely for educational purposes only. You are highly recommended to conduct all necessary due diligence and make your own informed decisions before making any financial decisions. The writer already owns shares in this company and may at any point in time increase or reduce their position without prior notice. Do not try to copy trade!

So, this is adulting is intended for a single recipient only, but occasional forwarding is totally fine! If you would like to order multiple subscriptions for your team with a group discount (minimum 5), please contact us directly.

Thanks for being a subscriber, and have a great day!