Broker: CGS International
Date of Report: July 17, 2025

Food Empire Holdings: Strategic Expansion, Strong Financials, and Regional Partnerships Drive Re-Rating Potential

Executive Summary

Food Empire Holdings Ltd (FEH), a leading Singapore-based food and beverage company, is on an impressive growth trajectory thanks to strategic regional partnerships, brand expansion initiatives, and robust financial performance. With a new collaboration with Santan and AirAsia, and ongoing support from Ikhlas Capital, FEH stands out as an attractive investment in the consumer goods sector. This report provides a comprehensive analysis of FEH’s latest strategic moves, financial outlook, ESG efforts, and a detailed peer comparison across the Asian F&B landscape.

Strategic Collaboration with Santan and AirAsia: Expanding Brand Reach

– FEH has entered a pivotal collaboration with Santan, AirAsia’s F&B brand, to co-develop and launch a new range of ready-to-drink beverages. – The first product, a Vietnamese iced coffee, will be featured both on AirAsia flights and in select retail channels throughout the region, ensuring high visibility and customer engagement. – The partnership enables FEH and Santan to explore further co-branded and private label beverage and snack products, leveraging AirAsia’s vast customer base. – The initial rollout will cover both in-flight and on-ground retail touchpoints, offering a seamless, consistent consumer experience. – This move is anticipated to significantly boost FEH’s brand awareness across Asia and signals the first of several business initiatives expected from the ongoing partnership with Ikhlas Capital.

Business Momentum: More Collaborations Ahead

– The Santan partnership is likely just the beginning, as FEH’s alliance with Ikhlas Capital is expected to yield more business collaborations. – While this initial collaboration may not immediately boost earnings, it is strategically vital for enhancing FEH’s brand profile and dispelling concerns over Ikhlas Capital’s investment motivations. – The report reiterates an “Add” rating on FEH, viewing any share price weakness as an attractive buying opportunity, particularly following a non-cash, non-operational revaluation loss on its Redeemable Exchange Note (REN).

Valuation Uplift: Target Price and Re-Rating Catalysts

– FEH’s valuation is set to re-rate towards a 3-standard deviation P/E of 17x, especially with the expected liquidity from the Monetary Authority of Singapore’s S\$5bn Equity Market Development Programme (EMDP) in the second half of 2025. – Target price is raised to S\$2.73, up from S\$2.28, reflecting 17x FY26F P/E, supported by a projected FY24-27F EPS CAGR of 10.3%. – Key catalysts for further re-rating include: – Improving operating margins on the back of stabilizing market demand. – Sustained market share in Russia, FEH’s key market. – Potential resolution to the Russia-Ukraine conflict. – Key risks include escalation of the Russia-Ukraine conflict affecting operations, and ruble depreciation impacting US-dollar reported revenue.

Financial Performance and Outlook: Consistent Growth Trajectory

Key Financial Metrics (US\$m unless stated):

– FEH demonstrates strong revenue and profit growth, with operating EBITDA expected to rise from US\$81.7m in 2023 to US\$110.9m by 2027. – Dividend yields remain attractive, with a forecasted 3.62% yield through 2027. – The company boasts strong return on equity, maintaining levels near 19%, and healthy cash generation.

Peer Analysis: How Food Empire Stacks Up

Peer Comparison Table (Selected Metrics for CY25F):

– FEH’s valuation and profitability metrics are competitive, with a P/E below the sector average, a strong 3-year EPS CAGR, and robust ROE. – Dividend yields are attractive compared to many regional peers.

ESG Initiatives and Risk Management

– FEH places significant emphasis on product safety, maintaining zero incidents of non-compliance with health, safety, and labeling regulations in FY24. – The company has robust quality and food safety standards, validated by external independent inspectors. – Country concentration risk is noteworthy: 30% of FEH’s FY24 revenue came from Russia, and 7% from Ukraine. FEH is actively diversifying into Vietnam, India, and Malaysia to mitigate this risk. – FEH recognizes the environmental impact of food manufacturing and is implementing energy-saving initiatives, particularly in its Vietnamese operations, including solar power, efficient lighting, and resource optimization.

Balance Sheet Strength and Capital Allocation

– As of FY24A, FEH reports: – Total cash and equivalents: US\$130.9m – Shareholders’ equity: US\$293.8m – Net gearing is low and improving, forecast to move from -16.2% in 2024 to -21.8% by 2027. – Capex is expected to increase, reflecting growth investments, with US\$30m projected annually by 2026-27. – Free cash flow to equity is forecast to grow steadily, reaching US\$51.4m by 2027.

Shareholder Structure and Price Performance

– Major shareholders: – Universal Integrated Corp: 25% – Tan Guek Ming: 12% – Nair Sudeep: 13.2% – Share price has surged, delivering absolute returns of 17.1% (1M), 59.4% (3M), and 109.9% (12M).

Conclusion: Add Rating Reiterated, Bright Prospects Ahead

CGS International reiterates its “Add” rating on Food Empire Holdings, highlighting strong business momentum, robust financial health, expanding regional partnerships, and attractive valuation. Strategic moves like the Santan collaboration and expected liquidity from Singapore’s EMDP position FEH for further upside, with a raised target price of S\$2.73 offering 28.8% potential upside from current levels. Key risks include geopolitical uncertainties in Russia and Ukraine, but FEH’s operational diversification and ESG leadership provide resilience.

Appendix: Rating and Recommendation Framework

– Add: Total return expected to exceed 10% over the next 12 months. – Hold: Total return between 0% and 10%. – Reduce: Total return expected to fall below 0%. – Sector and country ratings are provided to guide broader allocation strategies.

Distribution of Stock Ratings (as of June 30, 2025)

– Add: 70.6% – Hold: 20.5% – Reduce: 8.9% – 561 companies under coverage
This comprehensive analysis underscores Food Empire Holdings’ transformation into a leading regional F&B player, with strong fundamentals and forward-looking strategies set to deliver shareholder value in the years ahead.