KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

Company Update: Food Empire Holdings Ltd.

Company Update: 16 May 2024

More production on the way

  • Strong growth in South-East Asia and South Asia. Food Empire Holdings saw a sustained increase in sales across all its core markets in 1Q24, showcasing a resilient consumer demand. Demand for the company’s products remained strong, seeing 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.
  • Increased capacity in Malaysia. The group recently completed the expansion of its non-dairy creamer production facilities in Malaysia. Commercial production started on 1st April, boosting production of non-dairy creamer going forward. This is likely to drive growth for the group’s Southeast Asia region and translate into higher revenue for the group in the region.
  • While demand remains robust for the group’s products, the group continues to face headwinds such as higher coffee prices and a strong US dollar. We maintain an OUTPERFORM recommendation but lower our target price (TP) to S$1.35 (from $1.65 previously) due to upward pressure of cost of sales and foreign exchange losses.

1Q24 Business Updates.

Food Empire Holdings reported higher revenue of US$117.5mn for 1Q24, up 14.5% YoY, compared to US$102.6mn in 1Q23, led by strong growth in its South-East Asia and South Asia market, which saw a growth of 35.3% and 33.0% respectively. The company saw revenue growth across its other key markets, showcasing resilience in consumer demand amidst ongoing geopolitical tensions worldwide, in a high interest rate environment.

Rising cost of raw materials

Coffee prices had been rising since the start of April, and reached a high of US$247/lb before retracing back to the current level of around US$203/lb. The current level remains elevated, attributed to weather concerns in key coffee-producing regions, such as the recent drought in Vietnam. This increase in coffee prices is likely to lead to a higher cost of production for Food Empire in the near term.

Valuation & Action

We maintain an OUTPERFORM recommendation and reduce our TP to S$1.35, from S$1.65 previously, based on a blended valuation: Discounted Cash Flow (DCF), with a terminal growth rate of 2% and a WACC of 10.0%, as well as a comparable Multiples Valuation with an average industry price-to-sales multiple of 0.83x.


The company is exposed to currency risk as it operates in several key markets, including Russia, Ukraine, Kazakhstan, Vietnam, India, and many more. The escalation of geopolitical tensions, such as the Russia-Ukraine war, would further depreciate currencies such as the Ruble and Ukrainian hryvnia against the US dollar. The prolonged high-interest rate environment in the US also makes the USD comparably stronger compared to local currencies in Food Empire’s key markets.

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