CGS International
July 9, 2025

Food Empire Holdings: Expanding Horizons with India Coffee Investment and Lower Russia Exposure

Overview: Strategic Expansion and Growth Outlook

Food Empire Holdings Ltd (FEH) has unveiled ambitious plans to further solidify its position in the global food and beverage sector. With a US\$37 million investment aimed at expanding its spray-dried soluble coffee manufacturing facility in Andhra Pradesh, India, FEH is intensifying its focus on high-growth markets and reducing its dependency on Russia. This move, coupled with ongoing vertical integration initiatives and a robust financial outlook, positions the company for enhanced revenue and net profit prospects through FY28-30F.

India Coffee Plant Expansion: Accelerating Growth

• FEH will invest US\$37 million (including working capital) to expand its spray-dried soluble coffee manufacturing plant in Andhra Pradesh, India.
• Construction will commence in 4Q25F, with completion targeted for end-FY27F.
• Capacity is projected to increase by approximately 60%, from 6,000 tonnes per annum to 9,600 tonnes per annum.
• This expansion is a key component of FEH’s vertical integration strategy, enhancing control over the coffee processing cycle and supporting the growth of its branded consumer business.

In addition to the planned freeze-dried soluble coffee plant in Vietnam (expected early-FY28F), these projects will significantly boost FEH’s revenue and net profit trajectory from FY28 onwards.

Reducing Russia Revenue Dependency: A Strategic Shift

• As of end-FY24F, Russia contributed about 30% of FEH’s revenue.
• South Asia and Southeast Asia accounted for 40% of revenue, indicating a growing focus on these regions.
• The expansion in food ingredients (snacks, non-dairy creamer, coffee powder) is expected to bring the Russia revenue contribution below 30% during FY25-27F.

This shift is likely to broaden FEH’s appeal to investors whose mandates require reduced exposure to Russia, potentially increasing the available investor base.

Investment Case: Opportunity Amid Potential Share Price Weakness

• Potential share price weakness, possibly due to a US\$20 million non-cash, non-operational revaluation loss on its redeemable exchange note (REN), is viewed as a buying opportunity.
• Target Price (TP): S\$2.28, based on 14.2x FY26F P/E (2 standard deviations above its 9-year average P/E).
• Current Price: S\$1.90 (as of July 9, 2025), indicating a 20% upside.
• Consensus: 5 Buy, 0 Hold, 0 Sell.
• Key Re-rating Catalysts:
• Improving operating margins as market demand stabilizes.
• Sustained market share in Russia.
• Resolution of the Russia-Ukraine conflict.
• Key Risks:
• Escalation of the Russia-Ukraine conflict impacting Russian operations.
• Depreciation of the ruble versus the US dollar, resulting in lower USD revenue.

Financial Performance and Forecasts

Key Financial Highlights (US\$ millions unless stated):

• FY24-27F EPS CAGR: 10.3%
• Price performance (as of July 9, 2025):
• 1 Month: 2.2% absolute, 2.5% relative
• 3 Months: 55.7% absolute, 34.1% relative
• 12 Months: 96.9% absolute, 69.4% relative

Peer Comparison: Regional Food & Beverage Players

Peer Table (as of July 9, 2025):

Comprehensive Financials: Income Statement, Balance Sheet, and Cash Flow

Profit & Loss Forecast (US\$m):

• FY24A: Revenue: 476.3, Net Profit: 52.9
• FY25F: Revenue: 522.6, Net Profit: 60.0
• FY26F: Revenue: 572.0, Net Profit: 65.7
• FY27F: Revenue: 604.1, Net Profit: 70.9

• Operating EBITDA margins are set to improve from 15.7% in FY24A to 18.4% by FY27F.
• Recurring net profit grows steadily over the forecast period.
• Dividend payout ratio gradually declines, supporting reinvestment.

Balance Sheet Snapshot (US$m):

• Total Cash and Equivalents rise from 130.9 (FY24A) to 169.8 (FY27F).
• Shareholders’ Equity increases from 293.8 (FY24A) to 396.3 (FY27F).
• Total Liabilities remain stable, with a modest increase reflecting business expansion.

Cash Flow Highlights (US$m):

• Free Cash Flow to Equity climbs from 6.70 (FY24A) to 51.44 (FY27F).
• Capex expected at US\$20-30m annually through FY27F, reflecting ongoing investments in manufacturing capacity.
• Net cash per share improves from US\$0.09 (FY24A) to US\$0.17 (FY27F).

Major Shareholders and Market Metrics

• Universal Integrated Corp: 25.0%
• Tan Guek Ming: 12.0%
• Nair Sudeep: 13.2%
• Free Float: 39.6%
• Market Cap: S\$1,004m (US\$784.6m)
• Average Daily Turnover: S\$1.11m (US\$0.83m)

Conclusion: A Compelling Growth Story in Asia’s Food & Beverage Sector

Food Empire Holdings is strategically investing in high-growth regions with a clear focus on expanding manufacturing capacity and reducing revenue concentration risk from Russia. Supported by strong financials, robust margins, and attractive peer positioning, FEH presents a compelling case for investors seeking exposure to Asia’s dynamic food and beverage landscape. Potential share price weakness is viewed as an opportunity to accumulate shares, with upcoming catalysts and structural shifts expected to drive value creation over the medium term.

Stock Recommendation Framework

• Add: Total return expected to exceed 10% over the next 12 months.
• Hold: Total return between 0% and 10% over the next 12 months.
• Reduce: Total return expected to fall below 0% over the next 12 months.

The sector and country ratings definitions are available for investor reference, with Food Empire Holdings currently rated “Add” and poised for continued outperformance.

Distribution of Stock Ratings (Quarter ended June 30, 2025)

• Add: 70.6% (Investment Banking clients: 1.1%)
• Hold: 20.5% (0.5%)
• Reduce: 8.9% (0.5%)

Disclaimer

Readers are advised to review the full disclosures and disclaimers provided by CGS International. This article is for informational purposes only and does not constitute an offer or solicitation for any investment products. Please consult a financial advisor before making investment decisions.