logistics

The Group recorded 9MFY2023 net profit after tax of S$1.3 million compared to S$3.3 million a year ago, mainly due to lower receipt of government grants, higher operations expenses and increased finance expenses amid higher interest rates.

Net asset value per share amounted to 16.4 Singapore cents as at 31 December 2022 compared to 16.7 Singapore cents as at 31 March 2022.

With the PRC’s recent lifting of COVID-related restrictions, the Group expects mid-term business recovery as projects resume.  Operating costs remain a challenge.

While this may potentially be driving a slowdown in economic activities, it will push companies to accelerate their strategic shift to mitigate this risk through re-shoring and decentralizing their manufacturing footprint globally, presenting business opportunities for the Group’s Specialist Relocation and 3PL business segments.

• Specialist Relocation segment: The Group will continue to diversify into the semiconductor and automotive industries, while seeking opportunities within the PRC’s display panel sector as it transitions from TFT LCD screens to OLED technology.

Chasen also plans to secure new projects from semiconductor and equipment manufacturers in Malaysia and Singapore, as well as electronics and PV solar module players in Vietnam and India.

• 3PL: The Group broadly sees the demand for its cross-border transportation services peaking as pandemic-related disruption eases.

However, business will remain resilient as customers, who switched from air and sea freight to the Group’s 3PL services during the pandemic, have seen value in Chasen’s outstanding service quality, which has been further enhanced with the recent integration of railway as an alternative mode of transport.

In addition, business activities on warehousing, freight-forwarding and local/long-haul trucking was significantly higher and are expected to offset any potential decline in cross-border transportation services.

Demand for warehouse service is expected to increase in the quarters ahead. In response, the Group will offer its local transportation services, adding value to customers, and lifting revenue.

The Group is also participating in “SG Arrival Card” Cargo, a seamless clearance initiative that would greatly speed up the time required for the Group’s container truck drivers to clear the Singapore land checkpoints to less than five minutes, compared to manual paper clearance, which would take 10-15 minutes.

• T&E segment: The Group will build its pipeline of solar panel installation projects in Singapore and improve its component and parts manufacturing capabilities, with the aim to capture projects within emerging core technologies such as 5G, Internet of Things, MedTech and the automotive sector.

The T&E business segment will focus on improving its bottom line significantly as it capitalizes on post-COVID economic recovery to grow the Group’s top line across the region.

Justin Low, MD of Chasen Holdings.Mr Low Weng Fatt, Chasen’s MD and CEO, said, “Chasen’s diversified business and geographical spread has allowed us to remain broadly resilient as well as capitalized on opportunities arising from our customers’ re-shoring, de-centralising production locations and adjusting their inventory strategies. "The lifting of all COVID restrictions in the PRC is positive news for the resumption of projects and a return to normalcy in the medium term."

The share price of Food Empire Holdings has surged 35% year-to-date ahead of, and since, its FY2022 results release (see chart). This may partly be because the company has signalled its positive view on its business through frequent share buybacks, mostly from Aug 2022, reinforced by strong quarterly results since 1Q2022 -- and the CEO's investor briefings. Chart: Yahoo! However, probably because of multiple uncertaintites arising from the Ukraine war since Feb 2022, investors began to embrace the Food Empire story only from 3Q, thanks in part to positive analyst reports and the business resilience demonstrated in Food Empire's 1Q, 2Q and 3Q results. Underpinning the strong business performance were increases in Food Empire's selling prices to counter higher raw material prices or foreign currency devaluation. FY22 profit -- with an implied strong 4Q -- was an all-time high, along with proposed record dividends (4.4 cents/share):  Full-year dividend FY18 FY19 FY20 FY21 FY22 SGD cent 0.68 2.2 2.2 2.2 4.4 *Historically, Food Empire has not paid interim dividends

Here's CEO Sudeep Nair's take, articulated at an investor briefing last week, on the company's underlying strength: 


UOB Kay Hian and Maybank KE have put out reports analysing the FY2022 results, excerpts of which are republished in FOOD EMPIRE: After record profit, dividend, what do UOB KH and Maybank say? 

Food Empire's FY2022 net profit of US$60.1 million included a gain on disposal of Food Empire's 100% interest in an industrial building in MacPherson which housed its Singapore HQ and tenants.

Minus that, the core net profit was US$45.1 million (+134% y-o-y). 

It's worth noting that within the figure is a US$2 million impairment of one of the brands of Food Empire and a US$1 million impairment of an associate company (more on this below).

These are non-cash items and were recognised in 4Q2022, without which profitability would have been even higher.

The big picture is, Food Empire today is much more diversified by geography and it's vertically integrated -- but that wasn't the case 10 years ago.

Its FY2012 annual report showed that its revenue source was relatively concentrated back then: 


In contrast, FY2022 revenue sources were diversified with Southeast Asia and South Asia generating nearly US$133 million revenue: 

Q: What are you going to do with US$125 million cash (on the balance sheet as of end-2022)?

A: We've just announced record dividends to shareholders. We'll do share buybacks, we will need cash for a strong balance sheet to manage all the volatility and never be under pressure from any financial institution.

The group is self financing, it generates a lot of cash flow. Our objective is to reward shareholders over a longer period, diversify, diversify our business and make the company stronger. We want to build new businesses or grow or do something elsewhere. 

Q: Can you clarify the impairment on a brand as well as an associate?

A: It was an impairment on a brand we acquired maybe 15 years back in Russia and Ukraine, so that brand has presence in Ukraine mostly. And it’s sold mostly in the eastern part.For Ukraine, the discount rate used was very high, 40-50%.

The associate is a company in Italy we had invested in. It’s a retail business that was doing quite OK but post COVID they had to close down some outlets.

The Q&A content has been edited for brevity and clarity.
For more on the FY2022 results, see Food Empire's announcement here.