"We re-visited Food Empire’s Vietnam operation and facilities and came away more positive," writes Seet in his Sept 16 note, as he kept his "buy" call along with a higher target price of $2.92 from $2.62.
"We believe that Food Empire Vietnam is on track to deliver an estimated US$100 million of revenue in the current FY2025 and has also become the third-largest instant coffee player in Vietnam," says Seet.
In 1HFY2025, the company grew its revenue from southeast Asia by 25% y-o-y to US$77.5 million. Vietnam, specifically, led the charge with growth of 37% y-o-y, capturing market share from competitors.
The company is now producing around two million satchets a day. To support the growth, Food Empire is in the midst of expanding its production capacity in Vietnam by 15% next year and another 30% in 2027.
Seet expects both revenue and margin to remain strong in the current 2HFY2025 due to lower raw material costs, and that Vietnam should continue to be the company's main growth driver.
"With its strong pipeline of projects ahead, we believe Food Empire will continue to grow steadily in the coming years. A bonus share issue may also be a possibility to improve liquidity and reward shareholders," says Seet, whose revised target price is based on a valuation multiple of 19x FY2025, up from 17x.
William Tng of CGS International, meanwhile, has reiterated both his "add" call and target price. However, Tng already has a bullish target price of $2.94.
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Besides feeling upbeat over the prospects in Vietnam, Tng believes that continued business development and demand liquidity from the Monetary Authority of Singapore (MAS)’s $5 billion Equity Market Development Programme (EMDP) in 2HFY2025 will support his unchanged valuation basis of 3 s.d. above average P/E of 17x for FY2017 and FY2025.
Food Empire's 3 cents per share interim dividend - the first time it has paid out dividends at the half-year mark, is a sign of the company's confidence as well, reasons Tng.
Possible re-rating catalysts include improving operating margins on stabilising market demand; sustained market share in its key market of Russia and a resolution to the Russia-Ukraine conflict.
Key downside risks, meanwhile, are an escalation in Russia-Ukraine conflict, thereby affecting its Russian operations, and also the depreciation of the ruble vs US dollar, leading to lower revenue in US$ terms.
Food Empire shares closed at $2.59, down 1.15% for the day and up 164.29% year to date.
