Revenue from Vietnam surged 44.6% this quarter, driven by the combination of an enhanced sales force, effective marketing promotions and campaigns, as well as interactive consumer engagement activities that reinforced brand loyalty and increased new customer acquisition.
Analysts’ sentiment on FEH has turned more positive with research houses keeping their “buy” recommendations, while increasing their target prices.
Maybank Securities has increased its target price on FEH to $2.00 from $1.19 previously.
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Analyst Jarick Seet notes that 1QFY2025 revenue had beat expectations and more importantly, SEA revenue now exceeds that of Russia, validating the group’s revenue diversification strategy.
“Going forward, we expect margins to improve as price increase adjustments kick in. Growth in Asia is expected to be strong, supported by a robust pipeline of capacity expansion projects that are currently being carried out in the region,” says Seet.
He expects Asia to be the largest growth driver for FEH, with the group completing its construction of a freeze-dried soluble coffee manufacturing facility in Vietnam by 2028. This will position it as a leading manufacturer of soluble coffee in Asia.
In Malaysia, the expansion of its snack manufacturing facility by be completed in 1H2025 while commercial output will expand capacity by 50% by 3Q2025. The newly expanded non-dairy creamier manufacturing facility will also continue to increase production capacity utilisation. Finally, the construction of its first coffee-mix manufacturing facility in Kazakhstan will be completed by end-2025.
“Historically, Russia was FEH’s largest revenue and profit driver and this led to a valuation discount against its peers. With Russia no longer the dominant contributor and its Asia expansion plans in place, we believe the successful diversification justifies a P/E re-rating with a lower discount to its peers,” says Seet.
Similarly, UOB Kay Hian has maintained its “buy” call, while increasing its target price to $1.98 from $1.20 previously.
Analysts John Cheong and Heidi Mo also note that revenue came in slightly above expectations, forming 27% of their full-year estimate.
The analysts remain cautiously optimistic about sustaining strong revenue growth, because of ongoing investments in brand building as well as the market leadership positions of FEH’s brands.
FEH’s past investments have borne fruits and its robust expansion pipeline positions it strongly for its next phase of growth. FEH’s strategic focus on Asia allows it to capitalise on high-growth emerging markets that have shown an increasing preference for good quality instant beverages that provide convenience and cater to busy lifestyles.
“We believe FEH is due for a rerating thanks to its increasingly better track record in delivering robust results and easing tensions in Russia and Ukraine, two key segments of FEH. We opine that FEH will continue to see business growth as it successfully passes on pricing adjustments and embarks on strategic expansion with its strong brand equity,” say Cheong and Mo.
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“FEH maintains an optimistic outlook and is confident that its strong brand equity will provide resilience against the direct impact of the tariff wars,” they add.
CGS International on the other hand has kept its “add” call, while increasing its target price on FEH to $1.95 from $1.71 previously.
Analyst William Tng too notes that revenue came in above expectations. He also notes that management is cautiously optimistic of sustaining its topline performance ahead because of ongoing investments in brand building and the market leadership position of its brands.
Management guided that it does not expect FEH to be significantly affected by the US’s new tariff regime, as the US is not a major market for the group. For FY2025, management guided that revenue will be aided by the expansion of its snack manufacturing facility by 1HFY12025, with production by 3QFY2025 and higher utilisation rate for the expanded non-diary creamer plant.
The construction of its coffee-mix manufacturing facility in Kazakhstan is expected to be completed by end-FY2025 and management expects the plant to boost the group’s total coffee-mix production capacity by approximately 15%.
“We believe FEH’s earnings will remain resilient in the current uncertain environment as its branded products are attractively priced consumer staples,” says Tng, while expecting P/E to trend upwards to 13.4x, as the group continues to grow its net profit.
As at 11.30am, shares in FEH are trading 9.15% higher at $1.67.
