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Maybank Securities maintains 'buy' with higher TP of $1.36 for Food Empire Holdings as robust demand ensues

Nicole Lim
Nicole Lim • 2 min read
Maybank Securities maintains 'buy' with higher TP of $1.36 for Food Empire Holdings as robust demand ensues
Revenue growth for Food Empire was due to strong demand from its core markets in Russia and Ukraine, despite the ongoing war
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Food Empire Holdings’ strong revenue growth for the 1HFY2023 ended June and robust demand from core markets has Maybank Securities maintaining its “buy” call with a higher target price of $1.36. The brokerage’s target price was $1.29 previously.

On Aug 10, Food Empire’s earnings for the six-month period ended June stood at US$26.6 million ($36.10 million), down 1.6% y-o-y due to a foreign exchange (forex) difference of US$8 million. Despite the slight dip, Food Empire’s results still stood above analysts Jarick Seet and Eric Ong’s expectations at 55% of their FY2023 forecast.

During the 1HFY2023, Food Empire’s revenue grew to US$198.2 million, up 11.8% y-o-y due to strong demand from its core markets, as revenue from Russia, Ukraine and other Commonwealth of Independent States markets grew 23.6% and 20% y-o-y respectively.

Demand from Vietnam has also reversed a decline and increased y-o-y due to the group’s marketing efforts, Seet and Ong say.

They also note that gross margins increased from 29.3% to 35.1%, and operating profit surged 67.7% y-o-y to US$34.6 million.

The analysts say that management will be raising prices from next month by 7%-15% and this will be done in two tranches, mainly to combat the impact of a weaker ruble which has depreciated significantly in the past few months.

“We expect softness in revenue and gross profit in 3QFY2023 as these price increases typically take about three to six months to fully take effect but performance should pick up in 4QFY2023,” they add.

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Finally, Seet and Ong note that Food Empire has proven its business model to be resilient and has shown a strong performance despite an ongoing war in its core markets.

“We remain confident in management’s execution capability and strong track record. We also believe share-buybacks will continue which should provide good support to the share price,” they say.

As a result, Seet and Ong have raise their FY2023/FY2024 patmi estimates by 5% and
Increased their target price to $1.36, pegged to 11x FY2023 P/E.

As at 4.54pm, shares in Food Empire Holdings are trading flat at $1.05.

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