Share Price S$0.66
• Food Empire Holdings (FEH) is trading at a trailing PE of 13.7x, a 40% discount off its peers’ average. Based on Bloomberg’s estimate (one broker), FEH has a 12-month target price of S$0.84 with a 2013F dividend yield of 1.9%. Although the company does not have a formal dividend policy, management remains committed to distribute 20-25% of their 2013 net profit as dividends.
• FEH is a manufacturer and distributor of instant beverages and food products with key markets in Russia, Eastern Europe and Central Asia. The company currently has more than 200 products in its portfolio, including 3-in-1 flavoured coffee mix, 2-in-1 Cappuccino, instant breakfast cereal, flavoured fruit teas, potato crisps, confectionery and an assortment of frozen convenience food products.
• Currently, FEH’s products are exported to over 60 countries but its key market remains in Russia where it derived 60.3% of its 1H13 revenue. Its MacCoffee range of instant beverage is recognised as one of the leading brands in Russia, Ukraine and Kazakhstan.
• FEH has also recently refocused its marketing efforts on Asia with the launch of MacCoffee in Vietnam and Myanmar as well as Klassno in China, Hong Kong and Malaysia.
• FEH reported a 5.2% yoy increase in net profit after tax to US$9.1m for 1H13 due to stronger revenue growth but offset by higher expenses. Revenue grew 10.8% yoy to US$122.7m due to higher ASP and stronger sales growth in the core markets. Sales from Russia jumped 14.0% yoy to US$73.9m whereas sales from Eastern Europe and Central Asia registered a growth of 12.7% to US$37.3m. These two regions contribute more than 90% of FEH’s top-line.
• However, the increase in profitability was partially eroded by higher staff costs and other operating expenses. Staff costs increased by 16.5% yoy in 1H13 to US$15.9m due to higher wages from newly acquired companies and higher other operating expenses were incurred for advertising and promotion.
Publish date: 06/09/13