Excluding the US$32.6 million fair value loss, Food Empire’s net profit after tax on a normalised basis rose by 35.7% y-o-y to US$31.5 million due to higher revenue and gross margins across most core segments.
Revenue was up by 21.7% y-o-y to US$274.1 million as all regions saw double-digit y-o-y growth.
CGSI analysts William Tng and Tan Jie Hui have increased their target price to $2.94 from $2.73 previously as they roll their valuations over to FY2027.
To them, any potential share price weakness arising from the US$32.6 million non-cash, non-operational revaluation loss on Food Empire’s REN is “an opportunity” to add stakes into the company. Moreover, Food Empire’s interim dividend of 3 cents was a “surprise” and reflects the company’s confidence in its business, they note.
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“Continued business developments and demand liquidity from the Monetary Authority of Singapore’s (MAS) $5 billion Equity Market Development Programme (EQDP) in 2HFY2025 will, in our view, support our unchanged valuation basis of 3 standard deviations (s.d.) above average P/E of 17 times (FY2017 - FY2025),” write Tng and Tan on Aug 13. MAS, on July 21, announced that it has allocated $1.1 billion to three fund managers to kick-start the EQDP.
UOB Kay Hian analysts John Cheong and Heidi Mo have also increased their target price to $2.73 from $2.40 as Food Empire’s core 1HFY2025 patmi exceeded their expectations by 8%.
Cheong and Mo have also raised their FY2025 to FY2027 revenue forecasts by 4% to 5% after Food Empire’s top-line beat for the 1HFY2025.
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“We have also lifted gross margin assumptions by 1 percentage points (ppts) - 2 ppt on Food Empire’s successful pricing adjustments across the markets due to higher coffee bean prices,” they write. “Consequently, our FY2025 - FY2027 earnings forecasts have been revised upwards by 7% - 13%.”
Cheong and Mo’s new target price is pegged to an unchanged FY2026 P/E of 17 times based on 2 s.d. above Food Empire’s long-term historical mean.
The company currently trades at 14.5 times the analysts’ estimated FY2026 P/E, representing a “deep” 41% discount to its regional peers’ average of 24.7 times.
Maybank Securities analyst Jarick Seet has also maintained his “buy” call and target price of $2.62.
With Food Empire’s latest set of results meeting his estimates, Seet has maintained his forecasts.
In 2HFY2025, the analyst expects the company’s revenue and margins to “remain strong” with Vietnam remaining the main growth driver for the company.
“Margins should continue to widen as lower raw material prices gradually factor into costs. With its strong pipeline of projects ahead, we believe Food Empire will continue to grow steadily in coming years,” says Seet. “A bonus issue may also be a possibility to improve liquidity.”
Shares in Food Empire closed 1 cent higher or 0.44% up at $2.31 on Aug 15.
