Food Empire has had to bear higher costs and ongoing geopolitical tension in some of its key markets. Nonetheless, the company is enjoying stronger demand for its ready-mix coffee, which has helped the stock gain nearly 40% year to date.
“While the group continues to face headwinds such as higher coffee prices resulting in price disruptions, as well as a strong US dollar, demand continues to remain robust for the
group’s products,” says KGI Securities analyst Tang Kai Jie.
“We are optimistic about the group’s business going forward and keep an ‘outperform’ recommendation and increase our target price to $1.40.
See also: Morningstar ‘unsurprised’ by Nio new share offering, sees 35% growth forecast in FY2025
In FY2024 ended Dec 31, 2024, the company reported sales of US$476.3 million ($636.5 million), up 11.9% y-o-y, thanks to strong growth in Ukraine and other Central Asian markets. Sales in Vietnam were also up.
However, FY2024 earnings dropped by 6.4% y-o-y to US$52.9 million, no thanks to higher ingredient prices and also a step up in investments.
Despite the earnings drop, Food Empire is relatively generous with its dividends, giving a total payout of eight cents per share, including a special dividend of two cents.
The company has also been constantly buying back shares, with a total of 7.08 million shares bought back in FY2024.
“We anticipate demand to remain healthy across key markets, and the company will enjoy continued growth in FY25,” says Tang, who believes that the company’s capacity expansion plans will also drive higher sales.
In addition, Food Empire has maintained a strong cash position of US$130.9 million due to its ability to generate cash flow to fund its future expansions and conduct share buybacks. Its debt level, meanwhile, was just US$45.7 million.
“Its robust supply chain and market presence across several markets also give it a competitive advantage over its peers,” says Tang.
While the price of coffee bean, its key ingredient, has eased after hitting a multi-decade record in mid-February, Tang expects this cost to remain “elevated”.
He says Food Empire will gradually adjust its selling prices to pass on some of the cost increases.
Even so, Tang believes consumer demand remains resilient, thanks to a ramp-up in marketing efforts.
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Tang says Food Empire is also seen tapping the network of its new investor, Ikhlas Capital, to speed up its growth across regional markets.
Tang’s higher target price of $1.40 from $1.35 is based on a blended valuation method comprising first, a discounted cash flow, with a terminal growth rate of 2% and a weighted average cost of capital of 10.0%, as well as a comparable multiples valuation with an average industry price-to-sales multiple of 0.93 times. — The Edge Singapore
CNMC Goldmine
Price target:
Lim & Tan Securities ‘buy’ 48 cents
Soaring gold prices
Lim & Tan Securities analyst Chan En Jie has increased his target price on CNMC Goldmine to 48 cents from 43 cents after the company’s FY2024 ended Dec 31, 2024 revenue and net profit stood at 104% and 98% of his full-year forecasts, respectively.
On Feb 24, CNMC Goldmine announced earnings of US$9.8 million ($13.1 million) for FY2024, 140.3% higher y-o-y.
The bottom line, which marked a nine-year high, was attributed to the soaring gold prices and operational efficiencies.
FY2024 revenue also increased by 25% y-o-y to US$65.2 million thanks to higher gold prices and increased sales of lead and zinc concentrates.
“CNMC Goldmine remains a prime beneficiary of rising gold prices amidst global uncertainties and increasing demand for the safe-haven asset,” Chan writes in his March 20 report.
The analyst, who has kept his “buy” call, made the same point in his initiation report in February, noting that CNMC is a “direct beneficiary of rising prices for the precious metal.”
“We expect the company to ramp up production this year through expanding its carbon-in-leach (CIL) plant to increase processing capacity by 60%, and building its second underground gold mining facility to extract higher grade gold ores,” he adds. “Higher production will allow CNMC to capitalise on rising gold prices, which is forecasted to remain strong in 2025.”
Chan’s new target price, which is due to valuations that were rolled forward to FY2025, is based on discounted cash flow (DCF) and pegged to a blend of 12.1 times its FY2025 P/E, which is the average of CNMC’s peers. — Felicia Tan
AIMS APAC REIT
Price target:
RHB Bank Singapore ‘buy’ $1.48
Strong positive momentum
Vijay Natarajan of RHB Bank Singapore, citing “strong positive momentum”, has kept his “buy” call on AIMS APAC REIT and a higher target price of $1.48 from $1.46.
From his perspective, AIMS APAC REIT has been executing well operationally and in balance sheet management due to proactive management initiatives.
“With a comfortable gearing position, it is well-poised to capitalise on potential acquisition opportunities in Singapore and Australia,” states Natarajan in his March 24 note.
“Asset enhancements are on track and will start contributing positively from FY2026. AAREIT is one of our top mid-cap industrial REIT picks,” he adds.
The REIT is in the process of selling 3 Toh Tuck Link at a premium of 32.5% to valuation, and proceeds will be used to lower debt and bring its gearing to 32%.
This will give the REIT a debt headroom of $10 million for future acquisitions, assuming a 40% gearing level.
On the other hand, the REIT enjoys strong rental reversions of 28.2% y-o-y for 3QFY2025.
“While rent reversions are likely to moderate in FY2026, we expect it to be still healthy, in the high single digits,” says Natarajan.
Portfolio occupancy at 3QFY2025 dipped 0.5 percentage points q-o-q to 94.5% but is trending back up in the coming quarters.
The REIT is seen to enjoy lower financing costs after the recent issue of $125 million worth of five-year perps at a coupon of 4.7%, which was used to refinance an earlier issue at 5.65%.
Another $250 million worth of perps, at 5.375%, is due for a reset next September.
“We believe AAREIT could similarly issue new perps to replace it next year and achieve additional interest cost savings of $2 million per year,” says Natarajan.
With savings from the lower cost of debt, Natarajan has raised his FY2026 and FY2027 distribution per unit forecast by 1% to 2%, leading to his new target price of $1.48. — The Edge Singapore
Hong Leong Asia
Price target:
UOB Kay Hian ‘buy’ $1.46
Construction boom
Hong Leong Asia’s (HLA) share price has gained by some three quarters in the past year, but UOB Kay Hian believes the run has further legs on expectations that the manufacturing and building materials conglomerate will enjoy strong earnings growth this current FY2025 through FY2027.
In their March 24 note, analysts Llelleythan Tan Yi Rong and Heido Mo, believing that HLA’s valuation is “attractive” at current levels, have significantly raised HLA’s target price from $1.11 to $1.46.
“With a significant market share across its key markets, the building materials segment faces a robust pipeline of mega infrastructure and HDB projects. The diesel engine segment also faces strong volume growth across new markets,” the analysts state.
“In our view, HLA remains undervalued given the positive outlook for its businesses,” they add.
Within Singapore, the company’s cement business is set to enjoy stronger demand from an overview boom in the construction industry thanks to several big projects, including Changi Airport’s Terminal 5, the Tuas port and MRT lines.
In Malaysia, key infrastructure projects include the Mass Rapid Transit Phase 3, Pan Borneo Sabah Phase 1, High-Speed Rail and the Sabah-Sarawak Link Road.
“With significant market share and a strong pipeline of both public and private sector projects, HLA’s building materials unit segment serves as a strong proxy for the construction sector, in our view,” state Tan and Mo.
HLA’s separately listed subsidiary, China Yuchai International, is a leading diesel engine maker in China. It is actively investing to upgrade its product portfolio to be more green.
“Some new energy solutions include electric-continuously variable transmission power-split hybrid powertrain, integrated electric drive axle powertrain and hydrogen fuel cell systems,” the analysts note.
They estimate that HLA can grow its earnings by 23% this FY2025 to reach $79.4 million and by 11.9% in the following FY2026 to $88.8 million and $102.4 million in FY2027.
Using a sum-of-the-parts valuation, which includes a higher value of its separately listed associate BRC Asia , Tan and Mo have derived a target price of $1.46.
“With HLA’s current market cap at around $763 million, we still think that HLA remains undervalued, specifically its Building Materials Unit (BMU) segment, which is currently being neglected by the market,” say Tan and Mo. — The Edge Singapore
Sats
Price target:
OCBC Investment Research ‘buy’ $3.93
Muted revenue outlook
OCBC Investment Research (OIR) analyst Ada Lim has kept her “buy” call on Sats but with a lowered fair value of $3.93 from $4.11.
As part of its next phase to drive value creation and sustainable growth, Sats has previously indicated a goal to grow its revenue above $8 billion by FY2029, along with ebitda margin and return on equity (ROE) of at least 20% and 15%, respectively.
Sats has highlighted a strategy of strengthening its leadership in the global cargo market by growing its share of strategic customers across the network and creating incremental value along the supply chain, sustaining its position as Asia’s top aviation caterer and penetrating deeper into high-value segments of ready-to-eat meals in key markets.
“Much will be dependent on management’s ability to execute, in our view, and we keep an eye out for Sats’ growth trajectory in subsequent quarters as well as portfolio developments for further re-rating catalysts,” writes Lim in her March 18 note.
The analyst notes that the group’s fourth quarter tends to be seasonally weak, with the q-o-q decline usually driven by the drop-off in cargo volumes post-holiday season in its gateway services business. Meanwhile, Its food solutions segment could also see a dip in lower passenger volumes given the lack of major holidays globally from January to March.
Lim adds: “This seasonal trend has been distorted in recent years due to the Covid-19 pandemic and integration of Worldwide Flight Services (WFS). However, we see reasons for this trend to return in FY2025.”
According to Lim, importers have frontloaded good shipments from China into the US ahead of the new year in anticipation of tariffs against China and to avoid the Lunar New Year celebrations earlier this year.
As a result, according to S&P Global’s Port Import/Export Reporting Service (PIERS), US imports from Asia were up 10.5% y-o-y in October 2024.
“The seasonal drop may also be accentuated by Sats’ greater exposure to cargo handling post-WFS acquisition, with gateway services contributing to 78.5% of FY2024 revenue versus just 44.8% in FY2020,” writes Lim.
She continues: “Taking this into consideration, we dial back on our forecasts for FY2025 revenue, as well as the share of results from associates and joint ventures (SoAJV) ahead of Sats’ full-year results.”
While the analyst believes ongoing tariffs and US President Donald Trump’s removal of the “de minimis” exemption will impact the group’s business, she adds that it is still premature to quantify the effects.
Sats’ management is confident that its well-diversified network and customer base will allow the group to manage this impact better than its peers.
Lim concludes: “Until there is further clarity around the evolving situation, we expect Sats’ share price performance to remain fairly muted in the near term.” — Douglas Toh
First Resources
Price target:
Maybank Securities ‘hold’ $1.69
Limited upside
Maybank Securities analyst Ong Chee Ting has downgraded First Resources to “hold” from “buy” as he expects limited upside to his unchanged target price of $1.69.
Shares in First Resources surged after it announced its FY2024 FY2024 ended Dec 31, 2024 results on Feb 28 and closed at $1.66 on March 18. In FY2024, First Resources’ earnings surged by 69.1% y-o-y to US$245.8 million ($327.8 million) due to record production and higher crude palm oil (CPO) prices.
On March 18, First Resources announced it was acquiring 3.06 billion shares or a 91.17% stake in PT Austindo Nusantara Jaya for US$329.8 million ($440.8 million). On the same day, a conditional shares purchase agreement was entered between First Resources’ majority-owned subsidiary, PT Ciliandra Perkasa and PT Austindo Kencana Jaya, PT Memimpin Dengan Nurani, Sjakon George Tahija and George Santosa Tahija.
Ong notes that upon the deal’s completion, First Resources must conduct a mandatory tender offer for the rest of PT Austindo Nusantara Jaya’s shares. The deal is expected to be completed by May, and a 100% take-up offer will cost First Resources US$361.7 million.
In his report dated March 19, the analyst sees the acquisition as a long-term plus for the group even though it is expected to lead to earnings per share (EPS) dilution.
“By our estimate, the proposed acquisition is valued at EV/Planted hectare of US$10,202, a decent price considering the scarcity of land,” Ong writes.
“At 37.5 times FY2024 [First Resources’] P/E ratio, it is short-term EPS dilutive for First Resources, but PT Austindo Nusantara Jaya’s depressed EPS was partly due to losses at its non-core food crops. We are long-term positive on PT Austindo Nusantara Jaya’s potential and feedstock security it offers to First Resources’ downstream operations,” he adds.
On a pro forma basis, First Resources’ net tangible assets (NTA) and EPS would have been diluted by 1% and 8%, respectively, assuming the group bought 100% of PT Austindo Nusantara Jaya’s shares on Jan 1, 2024.
That said, Ong believes that the EPS dilution will be much smaller in the coming years should First Resources improve the profitability of its oil palm segment.
“Our back-of-the-envelope calculation suggests that the acquisition (funded by borrowings) will increase First Resources’ pro forma net gearing from 8% (for FY2024) to 32%, a still manageable level,” says the analyst.
Furthermore, for First Resources, the acquisition allowed the group to expand its upstream footprint by 27%, or 48,353ha of nucleus area, on top of its existing 178,854ha nucleus planted area in FY2024. The group will also be able to increase its CPO output by 25% to 1.25 million tonnes and enhance its feedstock availability for its 1.35 million tonne expanded refining and processing capacity by the end of 2025.
Based on channel checks, PT Austindo Nusantara Jaya’s stake was last listed for sale in the middle of 2024 when several parties bid for the stakes. In Ong’s view, PT Austindo Nusantara Jaya’s main attraction lies with its 100% RSPO-certified palm oil and fifth ranking on SPOTT. RSPO stands for Roundtable on Sustainable Palm Oil while SPOTT is a platform that assesses commodity producers, processors and traders on their public disclosure “regarding their organisation, policies, and practices related to environmental, social and governance (ESG) issues”.
In addition to his unchanged target price, Ong has kept his earnings estimates unchanged. Ong’s target price is based on 9 times First Resources’ FY2025 P/E ratio or –0.75 standard deviations (s.d.) of its six-year mean. — Felicia Tan
ISOTeam
Price target:
RHB Bank Singapore ‘buy’ 8 cents
Steady growth in addressable projects
Alfie Yeo of RHB Bank Singapore has raised his target price for ISOTeam from 7 cents to 8 cents, as he has become more positive on the company’s earnings outlook.
“We see it benefiting from and riding on more government projects ahead of the parliamentary election due by the end of 2025,” says Yeo in his March 21 note.
Upcoming projects that ISOTeam may pursue include new hawker centres, upgrading coffee shops, and adding facilities in housing estates. There is also the move to apply heat-reflective paint to all public housing by 2030 — a market ISOTeam is already in.
“As such, we expect construction activities to ramp up ahead of the upcoming polls and beyond. These should benefit ISOTeam, as it could garner more orders and record stronger revenue recognition going forward,” says Yeo.
For FY2025 to FY2027, Yeo has raised his earnings estimates by 11% each, as project timelines accelerate. In addition, Yeo figures that ISOTeam will enjoy better gross margins.
As an indication of its earnings visibility, the company has recently introduced a new dividend policy of a 30% payout ratio going forward, which raises Yeo’s estimated dividend yield to 5% from 4%. Revenue is supported by its $188.7 million order book as at Feb 11. — The Edge Singapore
