Over the years, Food Empire has grown a strong presence in numerous markets, including most recently, Vietnam. Its original markets of Russia, Ukraine and other former Soviet states remain key too.
Over FY2024 and FY2027, they project the company's revenue to grow at a CAGR of 15% and earnings by 31%, thanks to margin expansion from better operational leverage.
Chee and Sim have observed a series of corporate actions undertaken by Food Empire to unlock value, "with acquisition as the end goal."
"We believe Ikhlas and management are actively working towards a buyout of the company by Nov 2029, when the Ikhlas’ convertible bond investment matures," state Chee and Sim.
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They have singled out India's Tata Consumer as the "best fit". First, there are operational synergies with its existing coffee business.
Next, Tata Consumer fetches a rich valuation, which will support its equity raise to fund an earnings accretive acquisition.
Also, India and Russia are neutral towards each other and their mutual stance is "pragmatic".
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Under a bull case, the stock may be worth up to $4.35, while a bear scenario will see it heading to $2.45.
"We believe downside is supported by meaningful buyback capacity of $37 million," the analysts say.
Food Empire shares held steady at $2.70 on Feb 2. It is up 175.51% over the past year.
