CGS International
April 17, 2025
Food Empire Holdings: Earnings Resilient Amid Trade Tensions – A Deep Dive
Key Takeaways from Food Empire Holdings’ AGM
- Food Empire Holdings (FEH) held its Annual General Meeting on April 17, 2025. [[1]]
- Management indicated minimal direct sales to the US, accounting for less than 0.5% of FY24 group revenue. [[1]]
- The company is viewed as an attractive dividend yield stock, with an expected yield of 5.9% for FY25F-27F. [[1]]
- The report reiterates an “Add” recommendation. [[1]]
Minimal Impact from US-China Trade War
- The United States is not a primary market for FEH, representing less than 0.5% of FY24 revenue. [[1]]
- China is also not a key market. [[1]]
- Key markets for FEH’s 3-in-1 coffee mix in FY24 were: [[1]]
- Russia (30%) [[1]]
- Ukraine, Kazakhstan, and the CIS (26%) [[1]]
- Vietnam (16%) [[1]]
- Beverages, mainly FEH’s own brand 3-in-1 coffee mix, accounted for 75% of FY24 revenue. [[1]]
- The remaining 25% was contributed by potato chip snacks, non-dairy creamer, and soluble coffee powder. [[1]]
Indirect Economic Impacts
- A potential risk to FEH’s earnings outlook is slower economic growth in Vietnam. [[1]]-[[2]]
- This could lead to reduced demand and lower revenue upon forex translation if the Vietnamese Dong weakens against the US\$. [[2]]
- However, due to FEH’s mass-market pricing and the relatively stable demand for coffee, the impact is expected to be manageable. [[2]]
- A shift from higher-end coffee to more affordable 3-in-1 coffee options could occur due to weaker disposable income. [[2]]
Anticipated Revenue Growth in 1Q25F
- FEH is expected to benefit from a 10-20% average selling price increase in 2H24, which will positively impact FY25F earnings. [[2]]
- The Russian ruble’s appreciation by 33% against the US\$ in 1Q25 should result in higher revenue from Russia upon forex translation into US\$. [[2]]
- These factors are expected to drive higher 1Q25F revenue year-over-year (yoy). [[2]]
- FEH typically releases its 1Q business update (revenue disclosure only) around May 9. [[2]]
Defensive Earnings and “Add” Recommendation
- FEH is viewed as a consumer staple company with resilient earnings in an uncertain environment. [[2]]-[[3]]
- Current management has experience navigating global financial crises and geopolitical conflicts. [[3]]
- The “Add” recommendation is reiterated based on expected FY25-27F EPS growth, driven by the 3-in-1 coffee mix business and capacity expansion in food ingredients. [[3]]
- The valuation basis remains at 11.2x FY26F P/E, which is 1.0 standard deviation above the 5-year mean (2019-23). [[3]]
- A potential dividend yield of 5.9% for FY25-27F is considered attractive. [[3]]
Key Catalysts and Risks
- Key re-rating catalysts: [[3]]
- Improving operating margins due to stabilizing market demand. [[3]]
- Sustained market share in Russia. [[3]]
- Resolution of the Russia-Ukraine conflict. [[3]]
- Key downside risks: [[3]]
- Escalation of the Russia-Ukraine conflict affecting Russian operations. [[3]]
- Ruble depreciation against the US\$, leading to lower revenue in US\$ terms. [[3]]
Investment Summary
- Rating: ADD (no change) [[3]]
- Current Price: S\$1.33 [[3]]
- Target Price: S\$1.71 [[3]]
- Previous Target: S\$1.71 [[3]]
- Up/downside: 28.6% [[3]]
Major Shareholders
- Universal Integrated Corp: 24.9% [[3]]-[[4]]
- Tan Guek Ming: 12.9% [[4]]
- Nair Sudeep: 12.4% [[4]]
Analyst Information
- Analyst: William TNG, CFA [[4]]
- Contact: william.tng@cgsi.com [[4]]
Financial Summary
| (US\$m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue |
425.7 |
476.3 |
504.2 |
533.8 |
565.4 |
| Operating EBITDA |
81.75 |
74.96 |
81.13 |
89.28 |
97.95 |
| Net Profit |
56.51 |
52.53 |
53.87 |
58.52 |
62.92 |
| Core EPS (US\$) |
0.11 |
0.09 |
0.10 |
0.11 |
0.12 |
| Core EPS Growth |
21.2% |
(11.4%) |
8.4% |
8.6% |
7.5% |
| FD Core P/E (x) |
9.49 |
10.71 |
9.88 |
9.10 |
8.46 |
| DPS (US\$) |
0.075 |
0.060 |
0.060 |
0.060 |
0.060 |
| Dividend Yield |
7.37% |
5.90% |
5.90% |
5.90% |
5.90% |
| EV/EBITDA (x) |
5.29 |
6.38 |
5.79 |
5.09 |
4.43 |
| P/FCFE (x) |
14.24 |
79.42 |
13.12 |
11.41 |
10.14 |
| Net Gearing |
(30.6%) |
(16.2%) |
(17.9%) |
(20.9%) |
(24.7%) |
| P/BV (x) |
1.80 |
1.81 |
1.68 |
1.55 |
1.42 |
| ROE |
19.7% |
16.9% |
17.7% |
17.7% |
17.5% |
Peer Comparison
| Company |
Ticker |
Recom. |
Price (lcl curr) |
Target Price (lcl curr) |
Market Cap (US\$ m) |
P/E (x) CY25F |
P/E (x) CY26F |
3-year EPS CAGR (%) |
P/BV (x) CY25F |
P/BV (x) CY26F |
Recurring ROE (%) CY25F |
Dividend Yield (%) CY25F |
| Food Empire Holdings Ltd |
FEH SP |
Add |
1.33 |
1.71 |
533 |
9.9 |
9.1 |
8.2% |
1.68 |
1.55 |
17.7% |
5.9% |
| Delfi Ltd |
DELFI SP |
Add |
0.71 |
0.88 |
328 |
13.9 |
12.0 |
4.7% |
1.54 |
1.45 |
5.8% |
4.7% |
| Japfa Ltd |
JAP SP |
Hold |
0.62 |
0.62 |
888 |
9.0 |
8.5 |
na |
1.18 |
1.06 |
2.4% |
3.2% |
| Thai Beverage |
THBEV SP |
Reduce |
0.50 |
0.58 |
9,560 |
0.5 |
0.4 |
na |
0.08 |
0.07 |
0.5% |
1.6% |
Simple average excluding Food Empire: P/E (x) 7.8 CY25F, P/E (x) 7.0 CY26F, CAGR (%) 4.7%, P/BV (x) 0.93 CY25F, P/BV (x) 0.86 CY26F, ROE (%) 2.9 CY25F, Dividend Yield (%) 3.2 CY25F [[2]]
ESG Considerations
- LSEG has not yet issued an ESG score for Food Empire Holdings as of March 2025. [[3]]
Country Concentration Risk
- Russia and Ukraine are key markets for FEH. [[3]]
- In FY24, Russia accounted for 30% and Ukraine 7% of FEH’s total revenue, combining for 37%. [[3]]
- FEH is diversifying its dependence on these markets by building its 3-in-1 coffee mix business in Vietnam and food ingredients production in India and Malaysia. [[3]]
ESG Highlights
- Product safety is a paramount concern for FEH, with significant emphasis on ensuring products are safe for consumption and accurately labeled. [[3]]
- Mismanagement can lead to loss of reputation, financial penalties, and breaches of product safety laws. [[3]]
- FEH has established quality and food safety standards that meet or exceed statutory and regulatory requirements. [[3]]-[[4]]
- The group has implemented its own Quality Management System and Product Safety System, validated internally and by external inspectors. [[4]]
- FEH has set perpetual targets of: [[4]]
- 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 account for an estimated 25-35% of global greenhouse gas emissions. [[4]]
- FEH recognizes the importance of improving resource use efficiency and reducing emissions throughout its operations and value chain. [[4]]
- Food Empire Vietnam (FEV) has implemented energy-saving actions to reduce electricity consumption and emissions, 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 Performance Analysis
P/BV vs ROE
Analysis of P/BV (Price to Book Value) against ROE (Return on Equity) from Jan-21A to Jan-26F indicates a positive correlation between the company’s ROE and its valuation. [[4]]
12-mth Fwd FD Core P/E vs FD Core EPS Growth
Analysis of 12-month Forward Fully Diluted Core P/E against Fully Diluted Core EPS Growth from Jan-21A to Jan-26F highlights the relationship between earnings growth and investor valuation. [[4]]
Profit & Loss (US\$m)
| (US\$m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Net Revenues |
425.7 |
476.3 |
504.2 |
533.8 |
565.4 |
| Gross Profit |
152.3 |
156.1 |
164.3 |
174.5 |
185.3 |
| Operating EBITDA |
81.7 |
75.0 |
81.1 |
89.3 |
97.9 |
| Depreciation And Amortisation |
(10.8) |
(11.7) |
(13.0) |
(14.3) |
(15.7) |
| Operating EBIT |
70.9 |
63.3 |
68.1 |
74.9 |
82.3 |
| Financial Income/(Expense) |
0.8 |
(0.3) |
(1.4) |
(1.4) |
(1.7) |
| Pretax Income/(Loss) from Assoc. |
1.3 |
(0.5) |
0.0 |
0.0 |
(0.5) |
| Non-Operating Income/(Expense) |
(0.6) |
(0.2) |
1.0 |
0.0 |
(1.0) |
| Profit Before Tax (pre-EI) |
72.5 |
62.4 |
67.8 |
73.6 |
79.1 |
| Pre-tax Profit |
72.5 |
65.2 |
67.8 |
73.6 |
79.1 |
| Taxation |
(16.0) |
(12.3) |
(13.6) |
(14.7) |
(15.8) |
| Profit After Tax |
56.5 |
52.9 |
54.2 |
58.9 |
63.3 |
| Minority Interests |
0.0 |
(0.3) |
(0.3) |
(0.3) |
(0.3) |
| Net Profit |
56.5 |
52.5 |
53.9 |
58.5 |
62.9 |
| Recurring Net Profit |
56.5 |
49.7 |
53.9 |
58.5 |
62.9 |
Cash Flow (US\$m)
| (US\$m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| EBITDA |
81.75 |
74.96 |
81.13 |
89.28 |
97.95 |
| Cash Flow from Invt. & Assoc. |
(1.34) |
0.50 |
0.00 |
0.00 |
0.50 |
| Change In Working Capital |
(16.38) |
(38.30) |
(6.53) |
(6.95) |
(7.41) |
| Other Operating Cashflow |
1.73 |
0.40 |
0.90 |
0.42 |
(1.04) |
| Net Interest (Paid)/Received |
0.80 |
(0.26) |
(1.36) |
(1.36) |
(1.70) |
| Tax Paid |
(12.70) |
(11.78) |
(13.55) |
(14.71) |
(15.81) |
| Cashflow From Operations |
53.86 |
25.52 |
60.59 |
66.67 |
72.49 |
| Capex |
(12.16) |
(24.43) |
(20.00) |
(20.00) |
(20.00) |
| Cash Flow From Investing |
(12.37) |
(19.79) |
(20.00) |
(20.00) |
(20.00) |
| Debt Raised/(repaid) |
(3.85) |
0.97 |
0.00 |
0.00 |
0.00 |
| Proceeds From Issue Of Shares |
1.11 |
3.13 |
0.00 |
0.00 |
0.00 |
| Shares Repurchased |
(7.60) |
(6.20) |
0.00 |
0.00 |
0.00 |
| Dividends Paid |
(17.29) |
(39.16) |
(31.41) |
(31.41) |
(31.41) |
| Cash Flow From Financing |
(31.54) |
(5.74) |
(31.41) |
(31.41) |
(31.41) |
| Total Cash Generated |
9.95 |
0.00 |
9.18 |
15.26 |
21.07 |
| Free Cashflow To Equity |
37.65 |
6.70 |
40.59 |
46.67 |
52.49 |
| Free Cashflow To Firm |
45.03 |
9.97 |
46.29 |
52.37 |
58.19 |
Balance Sheet (US\$m)
| (US\$m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Cash And Equivalents |
131.3 |
130.9 |
140.0 |
155.3 |
176.4 |
| Total Debtors |
42.4 |
54.0 |
56.9 |
60.0 |
63.3 |
| Inventories |
76.7 |
110.8 |
118.0 |
124.9 |
132.3 |
| Total Other Current Assets |
7.9 |
10.1 |
10.1 |
10.1 |
10.1 |
| Total Current Assets |
258.3 |
305.7 |
325.0 |
350.3 |
382.0 |
| Fixed Assets |
114.9 |
131.3 |
138.3 |
144.0 |
148.3 |
| Total Investments |
12.6 |
8.5 |
8.5 |
8.5 |
8.0 |
| Intangible Assets |
8.8 |
10.2 |
10.2 |
10.2 |
10.2 |
| Total Other Non-Current Assets |
8.3 |
4.4 |
4.4 |
4.4 |
4.4 |
| Total Non-current Assets |
144.6 |
154.4 |
161.4 |
167.0 |
170.9 |
| Short-term Debt |
17.2 |
30.3 |
30.3 |
30.3 |
30.3 |
| Total Creditors |
53.5 |
62.1 |
65.7 |
69.2 |
72.9 |
| Other Current Liabilities |
6.2 |
7.0 |
7.0 |
7.0 |
7.0 |
| Total Current Liabilities |
76.8 |
99.3 |
103.0 |
106.5 |
110.2 |
| Total Long-term Debt |
23.9 |
52.6 |
52.6 |
52.6 |
52.6 |
| Total Other Non-Current Liabilities |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Total Non-current Liabilities |
23.9 |
52.6 |
52.6 |
52.6 |
52.6 |
| Total Provisions |
7.7 |
12.1 |
12.1 |
12.1 |
12.1 |
| Total Liabilities |
108.4 |
164.0 |
167.6 |
171.1 |
174.8 |
| Shareholders’ Equity |
295.6 |
293.8 |
316.3 |
343.4 |
374.9 |
| Minority Interests |
(1.1) |
2.3 |
2.6 |
3.0 |
3.3 |
| Total Equity |
294.5 |
296.1 |
318.9 |
346.3 |
378.2 |
Key Ratios
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue Growth |
6.9% |
11.9% |
5.8% |
5.9% |
5.9% |
| Operating EBITDA Growth |
29.3% |
(8.3%) |
8.2% |
10.0% |
9.7% |
| Operating EBITDA Margin |
19.2% |
15.7% |
16.1% |
16.7% |
17.3% |
| Net Cash Per Share (US\$) |
0.17 |
0.09 |
0.11 |
0.14 |
0.18 |
| BVPS (US\$) |
0.56 |
0.56 |
0.60 |
0.65 |
0.71 |
| Gross Interest Cover |
20.04 |
14.93 |
11.95 |
13.15 |
14.43 |
| Effective Tax Rate |
22.1% |
18.9% |
20.0% |
20.0% |
20.0% |
| Net Dividend Payout Ratio |
69.5% |
63.2% |
58.3% |
53.7% |
49.9% |
| Accounts Receivables Days |
29.85 |
33.69 |
36.93 |
36.95 |
36.94 |
| Inventory Days |
100.6 |
107.1 |
122.8 |
123.3 |
123.5 |
| Accounts Payables Days |
65.49 |
60.30 |
61.83 |
62.11 |
62.18 |
| ROIC (%) |
37.7% |
31.7% |
27.1% |
28.3% |
29.7% |
| ROCE (%) |
22.5% |
18.3% |
18.0% |
18.5% |
18.9% |
| Return On Average Assets |
14.2% |
11.7% |
11.7% |
12.0% |
12.1% |
Key Drivers
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue growth |
(3.5) |
(1.1) |
5.0 |
5.0 |
5.0 |
