• Food Empire's business has proven to be resilient through the Covid pandemic and past supply chain disruptions and forex volatility. Some challenges have passed for this producer of 3-in-1 coffeemix but a tough one has reared its head since last year -- rising coffee bean prices. • In a new report, CGS International recognised the likely impact of high coffee bean prices on the upcoming FY2024 results. (The longer-term impact can be softened as typically when input prices go up, Food Empire raises its product selling prices -- but there is a time lag) . CGS also expected foreign exchange impact (the Russian ruble has weakened further) and higher marketing expenses in the fast-growing Vietnam market.  Executive Chairman Tan Wang Cheow and CEO Sudeep Nair grace the opening of the company's new HQ in Tampines Grande in January 2025. Photo: Company/Facebook• CGS expects Food Empire to report full-year US$46 million net profit (-18% y-o-y) on a net margin of ~10%, which is similar to 1H2024. CGS also expects the company to propose a dividend of at least 5 cents/share in the upcoming FY24 results -- but not a repeat of the 5-cent FY2023 special dividend that was handed out following the sale of Food Empire's industrial building. • Food Empire recently moved its HQ office to Asia Green in Tampines, and held an opening ceremony last week (picture above). Read below excerpts of CGS' report ..... |
Excerpts from CGS International report
Analyst: William Tng, CFA
| Reiterate Add, with a higher S$1.53 TP on rollover |
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Food Empire |
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Share price: |
Target: |
We roll over our valuation to FY26F, leading to a higher S$1.53 TP, based on an unchanged 11.2x P/E multiple, 1.0 s.d. above its 5-year mean (2019-23).
We reiterate Add due to:
a) its potential to grow its operations in Vietnam into a new major revenue contributor, and
Food Empire's best-selling Cafe Pho is sold largely through mom-and-pop outlets in Vietnam. File photo.b) its potential to grow its food ingredients business.
Key re-rating catalysts:
a) improving operating margins on stabilising market demand,
b) sustained market share in its key market, Russia, and
c) a resolution to the Russia-Ukraine conflict.
Key downside risks:
1) an escalation in the Russia-Ukraine conflict affecting its Russian operations, and
2) depreciation of the Russian ruble against US$, leading to lower revenue in US$ terms.
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Food Empire dividends |
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Period |
FY20 |
FY21 |
FY22 |
FY23 |
FY24 |
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SGD ct |
2.2 |
2.2 |
4.4 |
5+5 |
5? |
In FY23, FEH declared an ordinary DPS of 5.0Scts and a special DPS of 5.0Scts. |
Full report here
