Overview of Food Empire Holdings Ltd
Food Empire Holdings Ltd (FEH) has emerged as a strong player in the food and beverages industry. With a focus on diversified geographic revenue streams and a robust expansion agenda, FEH reported a solid FY24 performance that surpassed forecasts despite challenging input cost pressures. The company has been proactive in adjusting pricing strategies, allowing a gradual pass-through of higher coffee prices while protecting its margins. In spite of a modest decline in core net profit on a year‐on‐year basis, FEH’s resilient operations resulted in a new US\$50 million net profit base, fueling an optimistic outlook.
Financial Performance Highlights
- Revenue Performance: FY24 revenue reached US\$476.3 million, an 11.9% year‐on‐year increase. Notably, the Southeast Asia segment delivered impressive growth at +27.3%, contributing 27.2% to total revenue, while the South Asia segment grew by 24.9% and contributed 12.9%.
- Profitability: Core net profit for FY24 came in at US\$49.7 million, outperforming both internal and Bloomberg consensus forecasts by approximately 7–8% thanks to better profit margins. Despite the revenue mix pressures from its Russian operations—with US\$ revenue slightly declining by 1.1% due to foreign exchange translation—the local currency performance remained healthy with a 7.3% rise.
- Dividend Policy: The company declared a final dividend of 6.0 cents and a special dividend of 2.0 cents, reinforcing a dividend yield that appears attractive at 7.5% potential yield.
Operational and Strategic Initiatives
FEH’s management has outlined a clear three-year growth plan that focuses on geographic expansion and capacity upgrades:
- Geographic Expansion: The company is set to increase its presence in Vietnam and Malaysia. The Vietnam operations are expected to serve as a new major revenue contributor, especially as its food ingredients manufacturing business in India and Malaysia picks up pace.
- Capacity and Facility Enhancements: Key capital projects include:
- The newly added creamer manufacturing facility (completed in 2Q24) is expected to reach full utilisation over the next 2–3 years.
- A planned expansion of the snack manufacturing facility in Malaysia, targeting completion by 1Q25 with commercial production by 2Q25.
- A new coffee-mix production facility in Kazakhstan, anticipated to be ready by end-FY25, and a freeze-dried soluble coffee manufacturing facility in Vietnam slated for completion by 2028.
Guidance and Valuation
The upward revisions in revenue and Earnings Per Share (EPS) forecasts for FY25 and FY26—by 9.8% and 11.2%, respectively—reflect higher contributions particularly from Vietnam and the food ingredients business. Maintaining an unchanged 11.2× forward P/E multiple, the target price is now raised to S\$1.71, up from the previous S\$1.53. Analysts have reiterated an Add recommendation as rising market share, improving operating margins, and the potential resolution of the Russia–Ukraine conflict are seen as key re-rating catalysts. However, downside risks remain in the form of geopolitical tensions and currency depreciation effects.
Detailed Financial Metrics
- FY24 Revenue: US\$476.3 million
- Core Net Profit: US\$49.7 million (adjusted from a reported US\$52.5 million with a fair value gain exclusion of US\$2.8 million)
- EPS Forecasts: Incremental increases for FY25 and FY26, with targets now at 0.1024 and 0.1112 US\$, respectively
- Dividend per Share (DPS): Final DPS of 6.0 cents plus a special DPS of 2.0 cents
- Operating EBITDA Margin and Forecasted Growth: Margins held steady around 30.0%, with operating EBITDA forecast improvements driven by stable market demand and cost efficiencies.
ESG and Risk Management
As a food manufacturing business, FEH places paramount emphasis on product safety and quality. The company adheres to rigorous quality management and product safety systems that not only meet, but in many cases exceed, statutory and regulatory requirements. Alongside its environmental initiatives, such as implementing energy-saving measures at its Food Empire Vietnam facility, the company has set long-term targets of zero confirmed non-compliance incidents. Nonetheless, country concentration risks remain, as the Russian and Ukrainian markets, representing significant sources of revenue historically, pose potential risks amid ongoing geopolitical uncertainties.
Peer Comparison and Deep Dive into Listed Companies
Alongside FEH’s robust performance, the research note presents a comprehensive peer comparison that covers key industry players within the food and beverages sector. The analysis provides insights on market capitalisation, P/E multiples, growth trajectories, profitability metrics, and dividend yields.
Food Empire Holdings Ltd (FEH SP) – Recommendation: Add
FEH leads the pack with an attractive re-rating catalyst based on expanding operations in Vietnam, strategic capacity upgrades, and resilient performance in key geographies. With a market-adjusted potential to grow its EPS and an appealing dividend yield, the recommendation remains an Add.
Ajinomoto Co. Inc
Although Ajinomoto is not rated with a consensus recommendation, its substantial market cap and operating scale in the food ingredients sector make it a notable competitor. The company shows a significant revenue base with growth figures in the low to mid-20% range year-over-year; however, its stock remains unranked by the research consensus.
Fraser & Neave Holdings (FNH MK) – Recommendation: Add
Fraser & Neave stands out in the peer set with a strong relative valuation and growth potential. With a target price significantly higher than its current share price, the company is recommended as an Add for investors seeking exposure to diversified food and beverage operations.
Jumbo Group Limited – Recommendation: Add
Jumbo Group has demonstrated consistent performance with a relatively low current share price but promising growth in EPS, earning it an Add recommendation. Its market dynamics and future prospects in the food service industry have made it an attractive opportunity.
Kimly Group – Recommendation: Hold
Kimly Group, trading at a modest level with stable market capitalization, is rated as Hold amidst concerns over moderate profit margins and competitive pressures. Its current fundamentals suggest a cautious stance from the analyst perspective.
Mayora Indah Tbk – Recommendation: Not Rated
Mayora Indah Tbk features prominently in the peer analysis with double-digit growth rates and a strong presence in the snacks and confectionery segment. However, the stock is not rated, leaving its recommendation status open amongst investors.
Monde Nissin Corp – Recommendation: Not Rated
Monde Nissin, with its substantial revenue base and encouraging growth prospects in processed food, remains unranked as per consensus reports. Its performance metrics suggest potential but await further catalyst clarity.
Nestlé (Malaysia) – Recommendation: Not Rated
Nestlé (Malaysia) is viewed as a stable player within the region, boasting strong brand recognition and operational resilience. Its analysis, however, does not include a specific recommendation from the research note.
Nestlé SA – Recommendation: Not Rated (Reduce – with a cautionary view)
Nestlé SA, despite its global scale, is subject to scrutiny with relatively higher P/E multiple valuations. The research note recommends a reduction in weighting for investors, given market dynamics and margin pressure considerations. The EU-centric risks and competitive industry environment demand caution.
Nissin Foods Holdings Co. Ltd – Recommendation: Not Rated
Nissin Foods exhibits robust operational metrics with a healthy ROE and competitive P/E multiples. Despite this, its recommendation remains unassigned, and investors are advised to remain attentive to evolving competitive and market conditions.
Nongshim Co. Ltd – Recommendation: Not Rated
Nongshim’s market performance is underpinned by steady growth and solid cash flows. Valuation multiples indicate attractive pricing relative to its peers; however, the stock is not explicitly rated in the research, urging cautious review from investors.
Power Root Bhd – Recommendation: Hold
Power Root maintains stable earnings with competitive operating margins. With a moderate dividend yield and cautious EPS growth, the stock garners a Hold recommendation for investors seeking steady returns without significant volatility.
TAC Consumer PCL – Recommendation: Not Rated
TAC Consumer, participating actively in the consumer staples sector, demonstrates sound revenue performance albeit with lower EPS growth relative to industry peers. The research note leaves its rating as not rated, suggesting further market observations are necessary.
Thai Beverage – Recommendation: Add
Thai Beverage emerges as one of the more attractive picks in the peer spectrum. With appealing dividend yields, strong profitability figures, and consistent revenue growth, it is recommended as an Add for investors looking to capitalise on robust consumer demand and a resilient market share.
Industry Summary and Final Thoughts
The comprehensive research note by CGS International stresses a positive outlook for Food Empire Holdings Ltd and highlights key catalysts—ranging from strategic capacity expansions in Vietnam, Malaysia, and Kazakhstan to improved operating margins amidst stabilising market demand. The peer comparison further underscores that while several companies such as Fraser & Neave, Jumbo Group, and Thai Beverage receive an Add recommendation, others are left unranked or recommended as Hold given the prevailing market uncertainties and competitive pressures.
Investors are advised to consider the robust dividend policies, improved EPS forecasts, and the strategic growth initiatives undertaken by FEH in conjunction with the broader peer landscape when assessing investment opportunities in the dynamic food and beverages sector.
This article is based exclusively on the contents of the research note provided by CGS International Securities Singapore Pte. Ltd. on February 27, 2025.
