| • After an outstanding 2022 result (despite the Ukraine war supply chain disruptions), which led to a corresponding rise in its share price, Food Empire continued to do well in 1Q. The momentum likely continues into 2Q -- Maybank KE's latest report says as much. •In addition, the report makes an intriguing remark about Food Empire's management seeking to unlock value for shareholders through "other ways". What other ways might there be -- aside from share buybacks and paying dividends which it has been doing? |
Excerpts from Maybank KE report
Analysts: Jarick Seet & Eric Ong
| Maintain BUY with an unchanged TP of SGD1.29 |
With the Ukraine war ongoing and no signs of a slowdown, we believe FEH will continue to benefit from strong demand in its core CIS markets, especially in Russia.
|
Food Empire |
|
|
Share price: |
Target: |
In addition, management’s focus on expanding Vietnam has showed positive signs in terms of traction.
As a result, we believe that the upcoming core 2Q23E numbers (due in August) should remain strong and 1H23E should still outperform 1H22E, despite a substantial USD7.3m FX gain in 1H22.
We believe management is exploring other ways to unlock shareholder value and will likely continue its share buy-back programme.
| Strong performance in core markets to persist |
Cafe Pho is Food Empire's No.1 selling brand in Vietnam. Photo: Company As of 1Q23, FEH reported strong revenue growth of 24% YoY to USD102.6m and 51% YoY NPAT growth to USD13.8m.
We believe such strong core performance should likely carry into 2Q23E due to strong demand from its core markets.
We also expect Vietnam to grow well due to a refocus of marketing efforts in the region. All in all, we expect 1H23E to remain stronger than 1H22 despite a substantial USD7.3m FX gain in 2Q22.
| Unlocking value, buybacks likely to continue |
|
STRONG |
|
|
Management has been doing share buy-backs consistently over the period even at current price levels and renewed its mandate in April 2023.
The last buyback was conducted on 21 Jun 2023 at SGD1.04/share.
Since renewing its mandate, it has purchased about 1.587m shares and we believe this exercise will likely continue as management concurs with our view that the shares are undervalued.
We believe management is also exploring other ways to unlock value for shareholders.
| Proven resilient business |
FEH have proven its business model to be resilient and has shown a strong performance despite an ongoing war in its core markets.
We remain confident in management’s execution capability and strong track record. Maintain BUY.
Full report here
