Food Empire Holdings Ltd. Continues Strong Growth Amidst Rising Coffee Prices
March 17, 2025 | KGI Securities (Singapore) Pte. Ltd.
Continued Strong Growth in South-East Asia and South Asia
Food Empire Holdings saw a sustained increase in sales across its core markets in FY24, showcasing a resilient consumer demand for the company’s products, which saw volume growth YoY, especially in the Southeast Asia and South Asia regions. The group continues to reap the benefits of its brand-building efforts in Vietnam, increasing its market share across the Vietnamese market. Demand for the group’s products in South Asia also remains strong amidst a coffee consumption boom in the region.
Significantly Expanding Production Capabilities Across Asia
In Malaysia, a non-dairy creamer facility expansion was completed in 2Q2024, with full utilization expected within three years, and a snack facility expansion is slated for completion by 1Q2025 with production starting in 2Q2025, substantially increasing snack output. Additionally, a new coffee-mix production facility in Kazakhstan, the company’s first in Central Asia, is under construction and will be operational by the end of 2025, boosting coffee-mix capacity by approximately 15%.
Increased Dividends for Third Consecutive Year
The Board proposes a total dividend of 8.0 Singapore cents per ordinary share comprising the first and final dividend of 6.0 Singapore cents and a special dividend of 2.0 Singapore cents. This is the third consecutive year of an increase in dividends (excluding special dividends).
Navigating Headwinds with Robust Demand
While the group continues to face headwinds such as higher coffee prices resulting in price disruptions, as well as a strong US dollar, demand continues to remain robust for the group’s products. The company is optimistic about the group’s business going forward and maintains an OUTPERFORM recommendation with an increased target price of S\$1.40.
Financials and Key Operating Statistics
Food Empire Holdings reported higher revenue of US\$476.3mn for FY24, up 11.9% YoY, compared to US\$425.7mn in FY23, led by strong growth in its South-East Asia and South Asia market, which saw a growth of 27.3% and 24.9% respectively. However, the company reported a decrease in net profit after tax by 6.4%, from US\$56.5mn in FY23 to US\$52.9mn in FY24 due to higher ingredient prices, as well as continued strong market investments in the company’s Southeast Asia markets.
Valuation and Recommendation
The analyst maintains an OUTPERFORM recommendation and increases the target price to S\$1.40, based on a blended valuation of Discounted Cash Flow (DCF) and comparable Multiples Valuation. The analyst anticipates demand to remain healthy across key markets, and the company will enjoy continued growth in FY25. The company’s expansion plans are expected to increase its production capabilities and also drive higher sales.
