FEH’s share price is currently at its highest level since its listing in 2000, having nearly doubled year to date to $1.91 on July 9.
CGSI’s Tng raised his target price on the consumer staples company to $2.28 from $1.95 in a June 26 report, calling it an underappreciated stock. He maintains his “add” call and target price in a July 8 note.
Tng expects FEH to post core net profit of US$30 million for 1HFY2025, up 27% y-o-y and 15% h-o-h.
Given FEH’s “strong” 1QFY2025 performance, where revenue grew 16% y-o-y, Tng believes 1HFY2025 revenue could contribute 50% to FY2025 revenue and reach US$261 million, up 16% y-o-y and 4% h-o-h.
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FEH typically only declares a final dividend (and special dividend if any) when its full-year results are released. Hence, Tng does not expect any interim dividend for 1HFY0225.
Still, Tng believes there is a case for FEH to declare a bonus issue, which could also celebrate Singapore’s 60th birthday.
“While a bonus issue theoretically does not alter a company’s valuation, it does represent an increase in available trading liquidity, which, in our view, will also be timely as the Monetary Authority of Singapore (MAS) reveals further updates to the $5 billion Equity Market Development Programme initiative in 2H2025,” writes Tng.
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Higher daily average trading liquidity will also improve the appeal of FEH as a potential investment candidate to larger institutional fund managers, says Tng.
At the release of the first set of equity market changes in February, Minister for National Development and MAS deputy chairman Chee Hong Tat said the equities market review group aims to complete the second tranche of measures by end-2025.
Tng sees “any potential share price weakness” arising from the US$20 million non-cash, non-operational revaluation loss on its Redeemable Exchange Note (REN) as an opportunity to “add” FEH.
“Given that eight months have passed since the issuance of the REN in November 2024, we would also like to see updates on initiatives that have been proposed by Ikhlas Capital,” says Tng.
FEH issued the REN to the Asean private equity fund manager in a bid to expand its business regionally. The deal gives Ikhlas Capital the right, but not obligation, to exchange the notes into new FEH shares.
As at 10.26am, shares in Food Empire Holdings are trading 5 cents higher, or 2.69% up, at $1.91.
