UOB Kay Hian Private Limited
Date of Report: 09 June 2025

Singapore Small-Mid Cap Stocks: Top Picks for 2025 as MAS S\$5b Fund Deployment Nears

Overview: Small-Mid Caps Back in Focus Amid Equity Market Development Programme

With the Monetary Authority of Singapore (MAS) preparing to deploy S\$5 billion under its Equity Market Development Programme (EMDP), investor interest in Singapore’s small and mid-cap stocks is heating up. UOB Kay Hian’s latest research highlights this timely opportunity and spotlights three high-conviction picks: Food Empire Holdings (FEH), Valuetronics, and Frencken Group. The report also provides a comprehensive review of previous picks, addresses tariff-related investor concerns, and offers detailed company-specific insights and financials.

Performance Review: May 2025 Small-Mid Cap Picks

• Valuetronics and Marco Polo Marine (MPM) posted gains of 10.2% and 2.4% month-on-month, respectively, reflecting strong fundamentals.
• PropNex experienced a 3.8% decline in May, likely due to broader negative sentiment in property-related counters, though it maintains a positive pipeline.

Limited Impact from US Tariffs Across Top Picks

• Food Empire Holdings (FEH): Less than US\$1m in annual shipments to the US (<1% of FY24 revenue), resulting in negligible direct impact.
• Valuetronics: 54% of FY25 revenue derived from US, but production already shifted from China to Vietnam since initial US tariffs, mitigating risk.
• Frencken: Only about 9% of revenue from US shipments, mostly routed via Singapore. Tariffs are expected to be absorbed by customers, limiting the impact.

Top Small/Mid Cap Picks for 2025

Detailed Company Analysis

Food Empire Holdings (FEH)

• Strong Regional Demand: All key segments delivered revenue growth in 1Q25—Southeast Asia (+34% yoy), South Asia (+32% yoy), and Commonwealth of Independent States (+15% yoy). Vietnam and Kazakhstan stood out on robust branded instant coffee demand and enhanced sales initiatives.
• Sustained Growth Trajectory: Group revenue up 16% yoy, marking the fourth consecutive year of growth despite inflation and raw material cost pressures. Market leadership and agile pricing strategies have helped shield margins and maintain volume.
• Expansion Pipeline: Major capacity expansions underway, including:
  • Malaysia snack facility (+50% output by 3Q25)
  • Kazakhstan coffee-mix plant (+15% capacity by end-2025)
  • Vietnam freeze-dried coffee plant (completion by 2028)
• Valuation and Returns: Target price S\$1.98 (15x 2025F PE), in line with regional peers. FEH boasts a 17.2% ROE and a 4.0% dividend yield for 2025F.
• Price Leadership vs. Delfi: FEH is preferred over Delfi due to stronger pricing power, successful cost pass-through, and ongoing expansion, while Delfi faces margin pressure from high cocoa prices.

Valuetronics

• Resilient FY26 Outlook: Expected to remain profitable despite global trade uncertainties, leveraging operational flexibility from Vietnam and China bases.
• Capacity Expansion: Vietnam factory’s fourth floor to boost capacity by ~30%, supporting new customer growth.
• Robust Financial Position: Net cash of HK\$1.1b (~S\$180m), or 65% of market cap, with no debt. High dividend payout ratios (FY23–25: 68%, 64%, 65%) exceed formal policy (30–50%).
• Attractive Shareholder Returns: Expecting a 6.8% FY26 dividend yield. HK\$250m share buyback programme in progress (HK\$107.1m utilised to date).
• Valuation: Target price S\$0.83 (11x FY26F PE, 1SD above historical mean), trading at just 3x FY26 ex-cash PE.

Frencken Group

• Growth Outlook: Management anticipates moderate revenue growth in 1H25, led by semiconductors and medical segments, with stable performance in analytical life sciences and industrial automation. Automotive remains soft amid macro uncertainties.
• Limited Tariff Exposure: US-bound revenue is about 9% (2024), with tariffs to be absorbed by customers, not the company. Diverse revenue sources and long-term customer relationships offer resilience.
• Supply Chain Flexibility: “Global Reach, Local Expertise” strategy enables rapid adaptation to trade shifts, offering local-for-local and supply chain diversification solutions with no major programme disruptions.
• Valuation: Target price S\$1.40 (15x 2025F PE, 1SD above mean), capturing the expected semiconductor cycle recovery and Frencken’s ability to outperform peers.
• Financial Highlights: 2025F ROE at 8.9% and dividend yield of 2.4%.

Consumer Staples: FEH vs. Delfi

• FEH: Demonstrates superior pricing power, adjusting prices across markets to offset coffee bean price spikes. Expansion efforts and strong brand equity drive firm demand and long-term growth.
• Delfi: Faces margin pressure from record-high cocoa prices, with limited ability to raise prices due to intense competition. Maintains a 5% 2025F dividend yield supported by robust cash flow despite margin challenges.

Conclusion: A Prime Window for Quality SGX Small/Mid Caps

With MAS’s S\$5b fund deployment poised to boost market activity and investor attention on small/mid-cap names, the three highlighted companies—Food Empire, Valuetronics, and Frencken—stand out for their resilient earnings, attractive valuations, and robust expansion strategies. Investors seeking exposure to Singapore’s next wave of growth stocks should closely watch these counters as the EMDP unfolds in the coming quarters.