SINGAPORE (March 2): UOB KayHian is keeping its “buy” on Food Empire Holdings with 78 cents target price, thanks to a stable Russian rouble, strong growth prospects in Indochina and proven pricing power in the CIS region.
In 4Q16, Food Empire recorded an increase in revenue in local currency terms in its core markets of Russia, Ukraine and Indochina. This shows the pricing power that Food Empire has, especially in Russia and Ukraine, given their huge coffee mix market share in these countries. Meanwhile, the Russian rouble has appreciated from 59/US$ to about 58/US$.
(See also: Food Empire swings back into profitability in 4Q with $4.1 mil of earnings)
In 4Q16, sales in Indochina rose 41.1% y-o-y in 4Q16 and 24.2% y-o-y in FY16 after the group’s aggressive advertising and promotion activities in Vietnam captured more market share in the fast-growing market.
Meanwhile, Caffebene, has the potential to contribute substantially should Food Empire manage to turn it around. Last March, the group and Eastern Valley Group took an initial US$13.6 million stake in the loss-making South Korean coffee chain.
Caffebene is said to be one of the largest coffee house chains in South Korea with a presence of about 1,000 stores worldwide. It was the first coffee franchise to receive the halal food certification on coffee beans and powder. Its latest store to open in Saudi Arabia saw sales exceed $0.2 million in just a month after opening in Dec.
Shares of Food Empire are trading at 58 cents.
