KGI Research Singapore

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

Company Update: Food Empire Holdings Ltd. (FEH SP/ F03.SI)

Company Update: 21 November 2023

Optimising cost structure alongside consumer resilience

  • Resilient consumer demand. Consumer demand remained relatively steady despite ongoing geopolitical tensions worldwide, in a high interest rate environment. Demand for coffee remained strong across company’s all key markets. Russia saw a slight decline in revenue mainly due to the depreciation of the Russian Ruble against the US dollar.
  • Optimising product mix. The company saw a significant increase in gross profit despite a lower revenue for the quarter as the company focused on optimising its product mix, reducing costs for the company. Gross Profit Margin (GPM) rose to 34.3% in 3Q23, compared to 29.0% in 3Q22.

9M23 business updates

. The company reported a revenue of US$305.1mn for 9M23, up 6.7% YoY, due mainly to higher volume and higher pricing from all the group’s core markets. The company saw a significant increase in revenue in South Asia, attributed to higher contributions from the group’s coffee manufacturing plants in India.

Favourable seasonality

We expect the upcoming winter seasonality to increase the demand for instant beverages across company’s key markets, especially in Russia, Ukraine, Kazakhstan, and CIS, where the regions are significantly colder during the winter season.

Valuation & Action

We maintain an OUTPERFORM recommendation and raise our TP to S$1.45, from S$1.25 previously, based on a blended valuation: Discounted Cash Flow (DCF), with a terminal growth rate of 2% and a WACC of 12%, as well as a comparable Multiples Valuation with an average industry price-to-sales multiple of 1.07x. We expect Food Empires’ cost of sales to reduce even further as the company focuses on optimising its product mix. The company also still maintains a strong cash position, showcasing its ability to generate cash flow to fund its future expansions. Its strong supply chain and market presence across several markets also put it at a competitive advantage against its peers.


The company continues to be exposed to currency risk as it operates its business in several key markets, including Russia, Ukraine, Kazakhstan, Vietnam, India, and many more. The escalation of geopolitical tension, such as the Russia-Ukraine war, would depreciate currencies such as the Ruble and Ukrainian hryvnia against the US dollar even further.

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