Excerpts from Maybank KE report
Analysts: Jarick Seet & Eric Ong

Food Empire: Strong 1Q23E can be expected

Maintain BUY with an unchanged TP of SGD1.29

We expect demand for its products to remain strong especially in its core markets like Russia and Vietnam.

Food Empire

Share price: 


Management is keen to do more marketing activities in Vietnam and we expect contribution from Vietnam to grow 20% YoY in FY23E.

Corporate share buy backs have also been consistent with the most recent purchase done at SGD1.01, its highest price ever bought on the 3rd of April 2023 which we believe shows the strong confidence of its outlook.

With a positive outlook and an undemanding valuation, we maintain BUY a unchanged TP of SGD1.29,based on 11x FY23E P/E.


 FY23E – Another potential record year


Strong 1H2023

We expect the next two quarters to be much stronger YoY as the (Russia-Ukraine) conflict started midway during 1Q22.”

-- Maybank KE

FEH delivered a record FY22 as revenue grew 24.5% YoY to USD398.4m driven by growth across most geographical segments, including Russia and the CIS region.

We expect demand to remain strong in Russia and the CIS region and stronger growth from Vietnam as well as the expansion of its no-dairy creamer facility which is expected to begin commercial production by 4Q23.

In India, spray dry and new freeze dry coffee plants continue to operate at full capacity but should yield higher margins due to cost reductions on the back of freight cost normalisation.

We also expect the next two quarters to be much stronger YoY as the conflict started midway during 1Q22.

 Share buybacks + possible interim dividend


CafePho323Cafe Pho is Food Empire's No.1 instant coffee brand in Vietnam. FEH has also been undertaking share-buybacks in the open market, buying at higher prices than ever before and we expect that to continue as management concur that the company is deeply undervalued and remains confident of their outlook.

We also expect interim dividends to be a possibility in the near future due to its strong cash flow generation and strong balance sheet.

 More legs to run

JarickSeet3.18Jarick Seet, analystFEH is currently trading at 8.9x core FY23E P/E, still a steep discount despite strong share price performance recently, versus both its private and listed valuations of global peers.

As such, we think that it could be an attractive target for bigger competitors given its strong presence in Russia and Vietnam.

With a positive outlook and resilience despite the ongoing Russia-Ukraine conflict, we maintain BUY.

Full report here. 

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