|• Food Empire's stock has done very well, rising from 65 cents at the start of the year to $1.07 recently. The market looks persuaded that Food Empire's business of selling 3-in-1 coffee is resilient.
• On top of its strong quarterly results, Food Empire has been buying back its shares frequently and paying dividends, and can be expected to continue to do so.
• With its recent announcement of its interest in dual-listing the stock in HK, management hopefully can make a strong case why this is positive for shareholders given the lukewarm reception that other SG listings have experienced when they ventured into HK.
• Meanwhile, just a day ahead of Food Empire's 3Q results announcement, Maybank KE has put out a note to investors. Read on .....
Excerpts from Maybank KE report
Analysts: Jarick Seet & Eric Ong
|3Q23E likely upbeat – maintain BUY|
We expect 3Q23 results (due 9 Nov) to be positive with estimated revenue and PATMI of USD110m and USD11.6m, up 1% and 53% YoY.
However, the recent depreciation of the Ruble might crimp the results.
We expect demand to remain strong in its core markets (CIS nations and Vietnam) and margins to improve in FY24 as it raised prices by 7-15% during Sept 2023 to counter the Ruble’s depreciation.
Maintain BUY and TP of SGD1.36, based on 11x FY23E P/E.
|Expect demand in core markets to remain strong|
Despite the Russia-Ukraine war, we expect demand in its core markets to remain strong.
Management increased marketing in Vietnam, where we saw encouraging signs of growth when we visited FEH in Aug’23.
Prices have been raised by 7-15% in two tranches, mainly to counter the impact of a weaker Ruble, which has depreciated by 30% since a year ago.
We expect softness in revenue and gross profit in 2H23E as it typically takes about 6 months for price increases to take effect but performance should pick up in 1Q24E.
|Dual listing in Hong Kong and Singapore?|
Prices have been raised by 7-15% in two tranches, mainly to counter the impact of a weaker Ruble, which has depreciated by 30% since a year ago.“”
Management is considering a dual listing in Hong Kong as it would provide access to two equity markets, a more diverse investor and shareholder base, and an additional source of fund raising.
The board also believes dual listing could increase the liquidity of the shares, boost shareholder value and enhance FEH’s corporate profile and visibility in international markets as FEH is seeking inorganic growth opportunities globally.
|We expect share buybacks to continue|
FEH’s business model has proven to be resilient and we are confident in management’s execution capability as it has a strong track record.
Further share buybacks would support the stock price. Maintain BUY.
Full report here