Company Update: Food Empire Holdings Ltd. (FEH SP/ F03.SI)
Company Update: 17 March 2025
Continued growth amidst rising coffee prices.
- 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 Its 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%.
FY24 Financial Results
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. The company’s Ukraine, Kazakhstan and CIS market saw a growth of 12.6% YoY, while the Russian market saw a slight decrease in revenue by 1.1% YoY. In local currency terms, the company saw revenue growth across all its key markets, showcasing strong consumer demand amidst the ongoing geopolitical tensions worldwide, in a high-interest rate environment. 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 & Action
We maintain an OUTPERFORM recommendation and increase our TP to S$1.40, 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 0.93x.
Risks
Food Empire 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 the group’s key markets. Furthermore, escalating trade tariffs alongside President Trump’s new administration may bring about more uncertainties as well as cost impact to the company as well.
