Food Empire Holdings (FEH SP): Rerating on Track – Analyst Report & Target Price

CGS International

May 13, 2025

Food Empire Holdings Ltd: Rerating on the Horizon

Food Empire Holdings (FEH) is poised for an upward valuation rerating, driven by robust growth in its Asian business over the next five years. First quarter 2025 (1Q25) revenue exceeded expectations, setting a positive tone for the fiscal year.

1Q25 Revenue Surpasses Forecasts

• FEH reported 1Q25 revenue of US\$137 million, a 3% quarter-over-quarter (qoq) increase and a 16% year-over-year (yoy) increase.
• This figure represents 27% of CGS International’s and Bloomberg consensus’ full-year 2025 forecasts (FY25F). [[1]]
• Southeast Asia is now the largest revenue contributor, surpassing Russia for the first time. [[1]]

Key Revenue Drivers

The primary factors fueling FEH’s revenue growth include:

• Southeast Asia Segment: Achieved US\$40 million in revenue, driven by a 45% yoy increase in Vietnam’s branded consumer products business. This growth is attributed to an expanded sales force and enhanced customer engagement strategies. [[1]]
• South Asia Segment: The second-best performer, benefiting from rising market demand for freeze-dried and spray-dried soluble coffee. Both facilities in India are operating at full capacity. [[1]]

Management Outlook: Cautiously Optimistic

• Management is optimistic about sustaining topline performance, supported by ongoing investments in brand building and market leadership. [[2]]
• The company does not anticipate significant impacts from the US’s new tariff regime, as the US is not a major market for the Group. [[2]]
• FY25F revenue will be supported by:
  • Expansion of the snack manufacturing facility by 1H25F, with production expected by 3Q25F. [[2]]
  • Higher utilization rate for the expanded non-dairy creamer plant. [[2]]
  • Completion of a coffee-mix manufacturing facility in Kazakhstan by end-FY25F, expected to boost total coffee-mix production capacity by approximately 15%. [[2]]
  • A new freeze-dried soluble coffee manufacturing facility in Vietnam is targeted for completion by 2028F. [[2]]

Recommendation: Reiterate Add with Higher Target Price

• CGS International maintains an Add recommendation for FEH, with a revised target price (TP) of S\$1.95. [[2]]
• FEH’s earnings are expected to remain resilient due to attractively priced consumer staples. [[2]]
• The P/E multiple is expected to rerate upwards to 13.4x (+2 standard deviations above its 5-year mean [2021-2025]). [[3]]
• The FY26F EPS forecast remains unchanged. [[3]]
• FY25-27F EPS growth will be driven by the 3-in-1 coffee mix business and capacity expansion in food ingredients. [[3]]
• Potential dividend yield of 5.1% for FY25-27F is attractive. [[3]]
• Previous valuation was at 11.2x FY26F P/E, +1.0 standard deviation above its 5-year mean. [[3]]

Key Catalysts and Risks

Key rerating catalysts:

• Improving operating margins due to stabilising market demand. [[3]]
• Sustained market share in Russia. [[3]]
• Resolution to the Russia-Ukraine conflict. [[3]]

Key downside risks:

• Escalation of the Russia-Ukraine conflict affecting Russian operations. [[3]]
• Ruble depreciation vs. the US\$, leading to lower revenue in US\$ terms. [[3]]

Peer Comparison

A comparison against industry peers indicates FEH’s competitive positioning.

ESG Factors in Focus

While LSEG has not yet issued an ESG score for Food Empire Holdings as of March 2025, several ESG factors are noteworthy.

• Country Concentration Risk: FEH’s significant revenue exposure to Russia and Ukraine (30% and 7% of FY24 revenue, respectively) presents a concentration risk. The company is actively diversifying its business through expansion in Vietnam, India, and Malaysia. [[3]]
• Product Safety: FEH prioritizes product safety and accurate labeling. Mismanagement could lead to reputational damage, financial penalties, and legal breaches. The company has established quality and food safety standards, validated internally and by external inspectors. [[3]]-[[4]]

ESG Targets:

• Zero confirmed incidents of non-compliance with consumer health and safety laws. [[4]]
• Zero confirmed incidents of non-compliance with product information and labeling regulations. [[4]]
• FEH achieved both targets in FY24. [[4]]

Sustainability Trends

• Food and agriculture contribute 25-35% of global greenhouse gas emissions. FEH recognizes the importance of improving resource use efficiency and reducing emissions. [[4]]
• Food Empire Vietnam (FEV) has implemented energy-saving measures, including: [[4]]-[[5]]
  • Day/night light switching systems. [[5]]
  • Solar electricity for factory perimeter lights. [[5]]
  • Sky lights in warehouses. [[5]]
  • Energy-saving LED lamps. [[5]]

Financial Analysis

Key Financial Ratios

• Revenue Growth: Projected to grow steadily from 5.8% in Dec-25F to 5.9% in Dec-27F. [[5]]
• Operating EBITDA Growth: Expected to increase from 8.2% in Dec-25F to 9.7% in Dec-27F. [[5]]
• Operating EBITDA Margin: Anticipated to expand from 16.1% in Dec-25F to 17.3% in Dec-27F. [[5]]

Balance Sheet Highlights

• Total Assets are projected to increase steadily, driven by growth in both current and non-current assets. [[5]]
• Shareholders’ Equity is expected to rise, reflecting improved profitability and financial performance. [[5]]

Recommendation Framework

Stock Ratings Definition: [[10]]

• Add: The stock’s total return is expected to exceed 10% over the next 12 months. [[10]]
• Hold: The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. [[10]]
• Reduce: The stock’s total return is expected to fall below 0% or more over the next 12 months. [[10]]

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months. [[10]]