Continue reading this on our app for a better experience

Open in App
Floating Button
Home Capital Broker's Calls

RHB maintains 'buy' rating for Food Empire with a higher TP on bullish FY2021 outlook

Atiqah Mokhtar
Atiqah Mokhtar • 2 min read
RHB maintains 'buy' rating for Food Empire with a higher TP on bullish FY2021 outlook
The higher TP of $1.27 comes following stronger performance for the 4QFY20.
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

RHB Group Research analyst Jarick Seet has maintained his “buy” rating on Food Empire with a higher target price of $1.27 from 80 cents previously.

The revised target price comes following Food Empire’s stronger performance for the 4QFY2020 ended December. Despite y-o-y revenues decreasing due to Covid-19 impacting sales, Food Empire was able to sequentially improve from 2QFY2020 onwards and reported record FY2020 results.

The company’s FY2020 earnings increased by 2.9% to US$26.5 million ($35.2 million) due to better margins, which management attributes to solving the operational and logistical issues caused by the pandemic and lower marketing and administrative costs. Food Empire declared record dividends of 2.2 cents per ordinary share for the period.

Seet expects the improved margins and increasing demand to underpin a strong rebound for Food Empire’s FY2021 performance.

“We expect demand to remain resilient, and increase in FY2021. Note that 4Q20 profitability was 11.5% stronger on a q-o-q basis. Going forward, management has also revealed that marketing and administrative costs are likely to remain low this year, even though revenue is likely to rebound further,” he writes.

In addition, the company will likely benefit from the appreciation of the ruble in November 2020, given its position as a market leader in Russia.

To this end, Food Empire remains one of Seet’s top sector picks, given that the company is undervalued compared to its peers.

“At 11 times FY2021 price-to-earnings (P/E), Food Empire is among the cheapest consumer staples players with a proven track record. Note that its peers are trading at 20-30x P/Es. With the company being a market leader in Russia and Ukraine, we remain bullish on its outlook, and maintain a ‘buy’ call,” Seet writes.

“Privatisation may be a possibility, given its undervalued status. Management has also been aggressively buying back shares in Dec 2020 and Jan 2021. The last share buyback price was at 76 cents per unit – on Jan 21, before the black-out period. We expect this to continue, as management believes the stock is deeply undervalued vs its peers and acquisition targets,” he adds.

As at 9.07am, shares in Food Empire are trading flat at 91.5 cents.

Highlights

Re test Testing QA Spotlight
1000th issue

Re test Testing QA Spotlight

Get the latest news updates in your mailbox
Never miss out on important financial news and get daily updates today
×
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.