SINGAPORE (May 12): RHB Research is reiterating its “buy” call on Food Empire while raising its target price to 85 cents from 76 cents previously, after the food and beverage (F&B) maker posted a 58.8% rise in 1Q earnings to $8.9 million on Thursday.
(See also: Food Empire reports 58.8% rise in 1Q earnings to $8.9 mil)
The research house has raised its FY17F earnings estimate by 13%, and the forecast for FY18-19 by 4% each year on the back of the strong 1Q results.
In a Friday report, analyst Juliana Cai highlights how Food Empire’s Kazakhstan and CIS markets outperformed over the quarter, growing over 100% y-o-y.
Although the group’s management says this was due to a change in its business model – where Food Empire reduced the price compensation to distributors and promoted more aggressively – Cai believes the improved performance was also in part attributable to the appreciation of the Kazakhstan Tenge (KZT) and other currencies in the CIS.
Sales from Russia also grew 23% y-o-y on a stronger ruble, she adds, although gains from such currency improvements were partially offset by a lower revenue and sales volume in Ukraine.
“We expect the markets in Russia, Kazakhstan and the other CIS markets to continue their strong performance in 2017… As the upstream projects continue to gain growth momentum, we believe the profitability of the company could continue to improve,” opines the analyst.
While sales from Indochina fell 18% due to an earlier Chinese New Year season this year, RHB is anticipating the region’s business to pick up from 2Q onwards as the management pursues its access into the Myanmar market.
It is also expecting more variants of coffee products to be launched in Vietnam this year.
As at 4.09pm, shares of Food Empire are trading 13.8% higher at 66 cents.
