SINGAPORE (May 14): RHB Research is reiterating its “buy” call on Food Empire with an unchanged target price of $1.07. This implies an upside of around 59% from its current trading price.
“We think the stock’s valuation, at 11.5x FY18F P/E, is very compelling at this moment, given the company’s strong organic growth,” says analyst Juliana Cai in a Monday report.
Food Empire saw its 1Q18 earnings grow 14% to US$7.2 million ($9.6 million), as revenue rose 15.5% to US$72.1 million.
See: Food Empire's 1Q earnings up 14% to $9.6 mil
Food Empire is “firing on all fronts,” says Cai. “The group delivered higher revenue across all its markets in the last quarter.”
At the same time, the analyst says the group’s key focus remains to expand outside of its core commonwealth independent states (CIS) markets into new markets like China and Myanmar.
“The group has a sound track record in the upstream manufacturing business, and plans to open a second coffee plant in India in 2020. We believe the commencement of the plant could help to drive its next leg of growth,” Cai says.
While she expects Food Empire to see a weaker 2Q18 due to seasonality and the depreciation of the Russian ruble, she says its full-year performance is expected to be “satisfactory”.
As at 11.21am, shares of Food Empire are trading half a cent higher at 67.5 cents, implying an estimated price-to-earnings ratio of 11.5 times and a dividend yield of 1.5% for FY18.
