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Target: S$1.30 - &rsquo Buy' Food Empire Holdings on expectations of ' record earnings' : UOB Kay Hian
UOB Kay Hian analysts John Cheong and Clement Ho have maintained &ldquo buy&rdquo on Food Empire, as they both &ldquo expect another year of record earnings&rdquo for the company.
On that, the analysts have also upped Food Empire&rsquo s target price by 37% to $1.30 from 95 cents previously, on the company&rsquo s &ldquo compelling valuation&rdquo .
&ldquo While the share price has increased 22% since we raised our target price on Jan 18, we see room for upside as valuation remains attractive at 12 times FY2021 price-to-earnings (P/E) vs peers&rsquo average of 25 times,&rdquo they write in a report dated Feb 9.
Due to the company&rsquo s &ldquo resilient&rdquo core earnings, and leading position in its core markets in Eastern Europe, as well as growing presence in Vietnam, its second-largest market, Cheong and Ho believe the valuation between Food Empire and its peers will narrow.
Given the stock&rsquo s lower valuation, Cheong and Ho believe there is a possibility of a takeover offer or privatisation of the company.
&ldquo In addition, in the past, SGX-listed peers including Super Group and Viz Branz were acquired and privatised at significantly higher valuations of 30.0 times and 16.4 times respectively,&rdquo they note.
&ldquo We raise our target price to $1.30 on a higher valuation multiple of 16.6 times FY2021 P/E, or 1 standard deviation above its historical average mean P/E, as we opine the group deserves to trade at a higher valuation,&rdquo they add.
The analysts also expect &ldquo another record year for core earnings, underpinned by an improvement in margins&rdquo .
Despite the lockdowns in Food Empire&rsquo s core markets, Cheong and Ho see the company&rsquo s lower revenue being offset by better margins due to hikes in its average selling prices (ASPs) and cost management.
&ldquo As such, our forecast incorporates 10.2% y-o-y growth in core earnings to US$28 million ($37.1 million) for 2020, the group&rsquo s highest level of core net profit (excluding forex loss) since its listing,&rdquo they say.
Cheong and Ho have also maintained their net profit forecasts for 2021 and 2022 at US$31 million and US$33 million respectively.
The company has yet to announce its results for 4QFY2020, but the analysts believe that investors can expect a &ldquo strong set a results&rdquo due to the company&rsquo s &ldquo aggressive&rdquo buybacks.
The company has bought 3.3 million shares or 0.6% of its share base since the beginning of the buyback mandate on April 23, 2020.
&ldquo This was mainly carried out in 4QFY2020 to January [this year] when Food Empire Holdings bought back around 3 million shares for around $2 million, potentially signalling a strong set of results for 4QFY2020 and confidence in its business outlook in 2021,&rdquo they write.
Food Empire a strong ' buy' for RHB on expectations of an exceptional FY2021
RHB&rsquo s small cap asean research team reckons that Food Empire is a steal.
&ldquo At a market valuation of 10x FY21F P/E, Food Empire is one of the cheapest consumer staples stocks,&rdquo explains analyst Jarick Seet in a Feb 8 note.
He believes the counter could even be a candidate for privatisation, given its undervalued position.
By comparison, the food manufacturer&rsquo s peers are trading at 20 &ndash 30x P/E, says Seet who is maintaining a strong &lsquo buy&rsquo call on the counter but at a revised target price of $1.27.
This is up 47 cents from his previous 80 cent call and is believed to be give a 44% upside from its 88 cent close on Feb 5.
&ldquo The worst is over,&rdquo explains Seet. &ldquo Due to Covid-19 and mass distribution of vaccines, we expect demand for Food Empire&rsquo s products to grow,&rdquo he adds.
This is unlike FY2020 when the food manufacturer&rsquo s sales had taken a hit for almost two months after strict lockdowns were imposed across the markets it operates in.
However, Seet notes that the management has &ldquo learnt to solve these problems and does not expect such matters to be repeated&rdquo .
While FY2020 revenue had inched down y-o-y across the markets, he observes that they have &ldquo improved robustly&rdquo on q-o-q basis, since 2QFY2020 ended June. Excluding foreign exchange costs, he says that the company would have recorded an impressive earnings growth of 87% q-o-q.
Seet is anticipating resilient demand for Food Empire&rsquo s products in its last quartered ended in December as well as in FY2021.
He is expecting its recurring PATMI (profit after taxes minus interest) to edge up by 10%, 20% and 5% between FY2020 to FY2022.
Seet is also looking at the company maintaining its FY2020 final and special dividend per share of 2 cents, which will translate to an FY2020 yield of 2.6%.
These estimates were arrived at after applying a discount to account for the fluctuation in the value of the Russian Rubble (RUB) which had increased at the end of November 2020. Seet believes this can benefit the group&rsquo s numbers, even though it can negate the effect by adjusting its selling prices.
The way he sees it, the key risks to this is strict lockdowns causing operational disruptions and a sharp depreciation in the RUB and currencies of other countries it has operations in.
UOB Kay Hian cites BRC Asia, Food Empire, Frencken and InnoTek as small-mid cap picks
UOB Kay Hian analyst John Cheong and the Singapore research team have highlighted BRC Asia, Food Empire, Frencken and InnoTek as its top buy picks among the small-mid cap sector.
He has given all three &ldquo buy&rdquo calls with target prices of $1.88, 88 cents and 82 cents respectively.
The brokerage has highlighted stocks based on laggards that are backed by solid earnings and a healthy balance sheet, along with stocks that have benefitted from China&rsquo s recovery. It has also highlighted stocks with the ability to recover quickly post-Covid-19, says Cheong.
For stocks such as Food Empire, Frencken and InnoTek, which are categorized as stocks that are of &ldquo laggard quality small-mid cap backed by solid earnings&rdquo , the companies have reported decent 9MFY2020 core net profit.
The way Cheong sees it, Food Empire is trading at an undemanding valuation of 8.5x 2021F price-to-earnings (P/E), which is a &ldquo significant discount to peers&rsquo average of approximately 20x 2021F P/E despite its growing presence in the Vietnam market and leading position in its core markets in Eastern Europe&rdquo .
&ldquo In spite of the challenges in 2020 including the Ruble depreciation and the lockdown in key markets in 2QFY2020, the group has reported decent 9MFY2020 core net profit (excluding forex losses) of $23 million,&rdquo he adds.
&ldquo This represents an 11.2% y-o-y growth on the back of better cost control and higher ASPs which mitigated the decline in revenue (-5.6% y-o-y).&rdquo
Frencken&rsquo s 3QFY2020 earnings of $13.3 million brought its 9MFY2020 net profit to 83% of the brokerage&rsquo s full-year estimates.
&ldquo The business update reflected earlier- and stronger-than expected operating leverage, buoyed mainly by a better sales mix and greater cost control efforts. We expect the semiconductor segment to continue driving growth going forward, driven by the accelerating development of 5G technology,&rdquo notes Cheong.
InnoTek looks set to benefit from China&rsquo s recovery in auto sales and the social distancing measures arising from Covid-19, which have boosted demand for large screen TVs.
&ldquo We expect [InnoTek&rsquo s] earnings per share (EPS) to grow by 229% h-o-h in 2H20 and 19.4% y-o-y in 2021. InnoTek has a net cash position of $73 million. At current prices, the stock trades at an undemanding valuation of 6.4x 2021F P/E, a discount to peers&rsquo average mean of 11.0x,&rdquo he says.
Jiutian Chemical, China Sunsine and Sunpower are those that will be able to leverage off China&rsquo s recovery, says Cheong.
For Jiutian Chemical, China&rsquo s recovery has led to enhanced demand for raw materials used to manufacture consumer end products, including fine chemicals produced by Jiutian Chemical.
&ldquo These factors were apparent in 3QFY2020 results which beat our expectations due to higher-than-expected average selling prices (ASPs). We expect better demand to drive further earnings growth. The recent retracement in share price (- 41% from its recent high of 12 cents) presents a buying opportunity as the stock trades at an attractive valuation of 3.8x 2020F P/E and 2.2x 2021F P/E,&rdquo he says.
&ldquo Current dimethylformamide (DMF) ASP of around Rmb8,000/tonne is still way above our expectation of Rmb7,200/tonne for 2021. Also, earnings surprise could come from higher volume of dimethylamine (DMA), which is the feedstock of DMF,&rdquo he adds.
On the back of a rise in automobile sales in China as the domestic economy recovers, selling prices of rubber accelerators &ndash the main earnings for China Sunsine &ndash are showing signs of recovery.
&ldquo In 2021, we expect net profit to grow by 46% y-o-y on the back of China Sunsine&rsquo s expanded production capacity. Furthermore, higher vehicle sales in China are expected to drive increased demand for tyres, hence leading to a potential 10% rise in the ASP of rubber accelerators from a low base in 2020,&rdquo notes Cheong.
Sunpower&rsquo s plants have resumed full work amid China&rsquo s economic recovery, which, according to Cheong, was apparent in its robust set of results for 3QFY2020.
&ldquo The green investment (GI) segment is on track to post a double-digit y-o-y growth for 2020 while the manufacturing and services (M& S) orderbook maintained its record-high orderbook of RMB2.8 billion as of end 3QFY2020. Management has earmarked the GI segment as the key driver for the group,&rdquo he says.
&ldquo We expect: a) full-year contributions from newly-acquired GI plants b) anticipated additional contributions from Phase 2 of the Shantou Project and the new Xintai Zhengda plant c) continuous acquisition of new customers following mandatory closures of &ldquo small dirty boilers&rdquo and/or mandatory relocations into industrial parks d) organic growth from existing customers and industrial parks served by the group&rsquo s GI plants and e) record-high M& S orderbook of Rmb2.8b to help drive earnings for the rest of 2020 and beyond,&rdquo he adds.
Stocks that are expected to benefit from a normalised recovery post Covid-19, include names in the construction and F& B services sectors such as BRC Asia, Kimly and Koufu.
For BRC Asia, build-to-order (BTO) projects continue to be favourable for the company with recent new HDB project launches in Tengah, Bishan and Toa Payoh being oversubscribed.
&ldquo We opine that the construction industry is still a laggard and new construction contracts awarded will likely recover off the low seen in Aug 2020, with Sep 2020 contracts awarded amounting to $840 million (+102% m-o-m),&rdquo says Cheong.
&ldquo With the gradual normalisation of construction activities and sustained margins, we are optimistic of BRC Asia&rsquo s recovery and expect earnings to rebound strongly in FY21 at 88% y-o-y. BRC Asia currently trades at 8.8x FY21F earnings, below its long-term average (excluding outliers).&rdquo
Kimly, which is the largest coffeeshop operator in Singapore, should benefit from Covid-19, as consumers become increasingly price-sensitive.
The group has a high net cash balance of $43.9 million, a higher dividend yield compared to its peers and strong future earnings growth from its newly-acquired and refurbished coffee shops.
&ldquo We expect a strong net profit compound annual growth rate (CAGR) of 9.3% for FY21-23. At current valuations, Kimly is trading at 12.5x FY21F P/E, well below its average 3-year mean P/E of 15.0x, and Singapore peers&rsquo 2021F P/E of 22.5x.&rdquo
While same-store sales have declined by 20% y-o-y in July to October 2020, sales at outlets in the heartlands and full-service restaurants have improved significantly, says Cheong.
&ldquo We expect a gradual recovery for outlets located at tertiary education and downtown area (where sales have been hampered by work-from-home measures) in 2021 as Covid-19 cases come under control in Singapore&hellip Apart from gradual resumption of activities, future growth drivers are contributions from Deli Asia (which has resilient earnings), new outlets, and its new Integrated Facility. Key share price catalyst for the stock is the opening of Singapore and Macau borders,&rdquo he adds.
seem like engine going to start.....
so food empire will up today ??
WBdisciple ( Date: 18-Nov-2020 08:34) Posted:
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Food empire is larger than Viz Brand but market capitalisation is only S$320 million...
Maybe they are better off as a private company....look at Viz Brand and SUPER...highly favoured by PE FUNDS and FOOD CONGLOMERATE and delisted at good valuations...
Maybe they are better off as a private company....look at Viz Brand and SUPER...highly favoured by PE FUNDS and FOOD CONGLOMERATE and delisted at good valuations...
Viz Branz owner closer to sale of majority stake to Bahrain-based Investcorp Holdings
https://www.bloomberg.com/news/articles/2020-11-16/singapore-s-viz-branz-owner-said-to-near-sale-of-majority-stake
The owner of Singaporean instant beverage maker Viz Branz Pte agreed to sell a majority stake to the biggest private equity and alternative asset manager in the Middle East.
Bahrain-based Investcorp Holdings BSC said Monday that controlling shareholder Ben Chng will retain &ldquo a significant ownership stake&rdquo in the company but disclosed no other details, according to a statement, which confirmed an earlier Bloomberg News report.
Chng, who is also the chief executive officer, was planning to sell a 51% stake in a deal that would give the company an enterprise value of as much as $500 million, according to people familiar with the matter, who asked not to be identified as the process is private.
&ldquo This transaction represents an exciting opportunity in a market leading company and an attractive, resilient sector with substantial growth dynamics,&rdquo Hazem Ben-Gacem, co-CEO of Investcorp, said in the statement.
A representative for Viz Branz did not immediately respond to requests for comment.
Chng took Viz Branz private in 2013 from the Singapore stock exchange in a deal that valued the company at $289 million, according to data compiled by Bloomberg.
Viz Branz, founded in 1988, manufactures and distributes cereal and instant beverage products in China and Southeast Asia under brands including Gold Roast and Cafe 21. It has manufacturing facilities in China, Singapore and Myanmar, and 74 distributors and 12 sales offices in 17 provinces in China, its website shows.
https://www.bloomberg.com/news/articles/2020-11-16/singapore-s-viz-branz-owner-said-to-near-sale-of-majority-stake
The owner of Singaporean instant beverage maker Viz Branz Pte agreed to sell a majority stake to the biggest private equity and alternative asset manager in the Middle East.
Bahrain-based Investcorp Holdings BSC said Monday that controlling shareholder Ben Chng will retain &ldquo a significant ownership stake&rdquo in the company but disclosed no other details, according to a statement, which confirmed an earlier Bloomberg News report.
Chng, who is also the chief executive officer, was planning to sell a 51% stake in a deal that would give the company an enterprise value of as much as $500 million, according to people familiar with the matter, who asked not to be identified as the process is private.
&ldquo This transaction represents an exciting opportunity in a market leading company and an attractive, resilient sector with substantial growth dynamics,&rdquo Hazem Ben-Gacem, co-CEO of Investcorp, said in the statement.
A representative for Viz Branz did not immediately respond to requests for comment.
Chng took Viz Branz private in 2013 from the Singapore stock exchange in a deal that valued the company at $289 million, according to data compiled by Bloomberg.
Viz Branz, founded in 1988, manufactures and distributes cereal and instant beverage products in China and Southeast Asia under brands including Gold Roast and Cafe 21. It has manufacturing facilities in China, Singapore and Myanmar, and 74 distributors and 12 sales offices in 17 provinces in China, its website shows.
So Monday will GAP up?
Joelton ( Date: 14-Nov-2020 12:27) Posted:
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The worst is over for Food Empire: RHB
Despite the resurgence of Covid-19 in Food Empire&rsquo s core markets, RHB Group Research believes that the group&rsquo s latest 3QFY2020 results were decent. With that, analyst Juliana Cai has kept her &ldquo buy&rdquo call on Food Empire with a higher target price of 80 cents from 72 cents previously.
To recap, Food Empire on Nov 11 issued a business update for its third quarter ended September, which posted a net profit after tax of US$6.3 million ($8.5 million), some 19.5% lower y-o-y. Revenue was also 8.5% lower y-o-y at US$70.3 million, as a result of the depreciating Russian and Ukrainian currencies, as well as lower sales from Vietnam due to Covid-19 disruptions.
Excluding the currency exchange depreciation, Food Empire would have recorded a net profit of US$9.0 million, 2.0% higher y-o-y, which was above the analyst&rsquo s expectation.
While revenues were down y-o-y across all the markets, it has shown strong sequential improvement from 2QFY2020. Management highlighted that demand for their instant coffee products has been stable.
Barring strict national lockdowns that might result in operational and logistical issues, Cai expects sales volume to remain fairly resilient despite the pandemic. With that, she believes that the worst is over for Food Empire.
&ldquo We expect the full-year to end strongly and raised our FY2020-2022 recurring PATMI by 14%, 4% and 1%,&rdquo says Cai, whose estimations on the group&rsquo s recurring net profit are US$27 million for FY2020, US$29 million for FY2021, and US$32 million for FY2022.
However, due to the volatility surrounding the RUB and the related currencies of the Commonwealth of Independent States (CIS), Cai has lowered her target P/E from 12 times to 11 times.
&ldquo Given that the group is able to generate a fairly resilient set of earnings amidst the challenges posed by the pandemic, we expect it to maintain last year&rsquo s final and special dividends totalling 2 cents, per share. This raises our expected dividend yield to 3.4%,&rdquo she adds.
Moving into FY2021, the group is expected to focus on maintaining decent earnings amid the challenging environment. Hence, advertising and promotion expenses are expected to be kept low, while keeping revenue and market share stable.
On the positive side, its second India plant should commence production next year as the country lift its restriction for business travels to facilitate the commissioning of the plant.
closed strong !!
seem like going to break 0.65 soon... houses calling a BUY !!!
Food Empire posts 19.5% drop in 3Q profit to $8.5 mil
Food Empire announced in its business update on Nov 11 that its 3QFY2020 net profit after tax has fallen some 19.5% to US$6.3 million ($8.5 million) from US$7.8 million a year ago.
Year to date, 9MFY2020 profit after tax was 6.6% lower y-o-y at US$19.5 million.
For the third quarter ended September, revenue declined by 8.5% to US$70.3 million from US$76.8 million a year ago, bringing gross profit to US$26.5 million, 13.1% lower than the previous year.
The decline in revenue was largely due to lower sales contribution from the Group&rsquo s Russia and Ukraine markets resulting from the depreciation of the Russian Ruble, Ukrainian Hryvnia against the US dollar and lower sales from Covid-19 disruptions in the Vietnam market (South-East Asia segment).
Overall, the group managed to reduce its expenses, as selling and marketing expenses were 35.7% lower y-o-y at US$8.0 million and general and administrative expenses fell 2.0% y-o-y to US$8.8 million.
As at end-September, cash and cash equivalents stood at US$54.3 million.
Overall, the weaker set of 3QFY2020 and 9MFY2020 results were due to the effects of Covid-19, as new waves of infections affected many markets that the group operates in, especially Russia, Ukraine and Vietnam.
&ldquo The group will continue to monitor its trade receivables and cash flows tightly as the Covid-19 situation shows no signs of abatement. As at 9MFY2020, we have not experienced significant slowdown in collectibles that may be of concern to management. The group&rsquo s Business heads in all major markets are keeping a close watch on changes in consumer buying behaviour and trade receivables collection patterns and will make the necessary adjustments to ensure business continuity,&rdquo according to the business update.
On the group&rsquo s operations, it has resumed full production at its coffee plant in India, while its second coffee plant is expected to be ready for trial production by 1QFY2021.
In Malaysia, where the group operates non-dairy creamer, snacks and instant coffee mix packing facilities, most movement restrictions have been lifted since the beginning of June 2020. However, in view of the re-emergence of new clusters in Malaysia, target Movement Control Orders were enacted in the affected regions. The group&rsquo s operations remain largely unaffected up to now.
Looking ahead, the group expects business conditions to remain uncertain amid resurgence of Covid-19 in various parts of the world.
Nonetheless, it says that that it will continue to navigate the challenges arising from the crisis by adjusting to new norms and evolving market conditions, intermittent lockdowns, rising unemployment and volatile currency conditions.
&ldquo We are unable to quantify the financial impact as it will depend on variables beyond our control,&rdquo says the group, whose board is confident that business will remain sustainable and will be able to near-term obligations, meet its debt covenants and service its debt obligations.
Food Empire announced in its business update on Nov 11 that its 3QFY2020 net profit after tax has fallen some 19.5% to US$6.3 million ($8.5 million) from US$7.8 million a year ago.
Year to date, 9MFY2020 profit after tax was 6.6% lower y-o-y at US$19.5 million.
For the third quarter ended September, revenue declined by 8.5% to US$70.3 million from US$76.8 million a year ago, bringing gross profit to US$26.5 million, 13.1% lower than the previous year.
The decline in revenue was largely due to lower sales contribution from the Group&rsquo s Russia and Ukraine markets resulting from the depreciation of the Russian Ruble, Ukrainian Hryvnia against the US dollar and lower sales from Covid-19 disruptions in the Vietnam market (South-East Asia segment).
Overall, the group managed to reduce its expenses, as selling and marketing expenses were 35.7% lower y-o-y at US$8.0 million and general and administrative expenses fell 2.0% y-o-y to US$8.8 million.
As at end-September, cash and cash equivalents stood at US$54.3 million.
Overall, the weaker set of 3QFY2020 and 9MFY2020 results were due to the effects of Covid-19, as new waves of infections affected many markets that the group operates in, especially Russia, Ukraine and Vietnam.
&ldquo The group will continue to monitor its trade receivables and cash flows tightly as the Covid-19 situation shows no signs of abatement. As at 9MFY2020, we have not experienced significant slowdown in collectibles that may be of concern to management. The group&rsquo s Business heads in all major markets are keeping a close watch on changes in consumer buying behaviour and trade receivables collection patterns and will make the necessary adjustments to ensure business continuity,&rdquo according to the business update.
On the group&rsquo s operations, it has resumed full production at its coffee plant in India, while its second coffee plant is expected to be ready for trial production by 1QFY2021.
In Malaysia, where the group operates non-dairy creamer, snacks and instant coffee mix packing facilities, most movement restrictions have been lifted since the beginning of June 2020. However, in view of the re-emergence of new clusters in Malaysia, target Movement Control Orders were enacted in the affected regions. The group&rsquo s operations remain largely unaffected up to now.
Looking ahead, the group expects business conditions to remain uncertain amid resurgence of Covid-19 in various parts of the world.
Nonetheless, it says that that it will continue to navigate the challenges arising from the crisis by adjusting to new norms and evolving market conditions, intermittent lockdowns, rising unemployment and volatile currency conditions.
&ldquo We are unable to quantify the financial impact as it will depend on variables beyond our control,&rdquo says the group, whose board is confident that business will remain sustainable and will be able to near-term obligations, meet its debt covenants and service its debt obligations.
Good business
Buy !!! going to break up soon ...
Food Empire' s coffee empire is gradually strengthening as lockdown measures ease
The Covid-19 pandemic is slowly improving in some countries, with lockdown measures easing and market activities resuming. This is apparent in coffee products manufacturer and distributor Food Empire&rsquo s core markets in Russia and Ukraine.
This means an improvement in mobility trends at shops and the recovery in retail sales.
With that, UOB Kay Hian is remaining positive on Food Empire&rsquo s outlook and is keeping a &ldquo buy&rdquo recommendation on the stock with a target price of 85 cents.
To recap, in its latest 2Q20 results, the group&rsquo s revenue from Russia fell by 20% y-o-y, due to stay-at-home measures implemented at end-March. For most regions, footfall at shops plummeted as residences were confined to their homes, and food purchases were only allowed at shops closest to their place of residence.
But since June, Russia has been gradually easing restrictions and a three-stage reopening plan was announced by the federal government, with regional governors ultimately deciding how and when to proceed. With that, there has been an improvement in mobility trend at places such as grocery markets and specialty food shops. Ukraine has also seen similar patterns with restrictions being eased.
With the reopening of retail businesses in most regions, retail food sales in Russia rebounded with the pace of decline narrowing to -2.2% y-o-y in July, while retail turnover in Ukraine bounced back in July, registering a y-o-y growth of 7.8% for the first month since April.
This mirrors management&rsquo s guidance in 2Q20 of sales slowly reverting to pre-Covid-19 levels.
In a September 24 report, analyst Joohijit Kaur says, &ldquo We are encouraged by the sequential recovery in these markets and our forecast accounts for a moderate 5.1% y-o-y decline in core earnings in 2H20 compared with -24% y-o-y (excluding forex gain) in 2Q20.&rdquo
Furthermore, the group has managed to mitigate the impact of the volatile Russian Rouble by implementing a an average selling price (ASP) hike in April. With the price hike being carried out in stages, the analyst reckons that this will only be more apparent in the group&rsquo s 3Q20 results as compared to 2Q20.
Additionally, the group has also managed to contain cost, with admin expense being reduced by US$2 million in 2Q20, forming 13.2% of sales compared to 14.2% in 2Q19.
&ldquo Given the consumer staple nature of its products, low price point and its market leading position, demand for its products is relatively price inelastic and is fairly resilient in the face of an economic slowdown, in our view,&rdquo says Kaur.
Meanwhile in Vietnam, the group&rsquo s second largest and fast growing market, sales have been impacted less by the pandemic and have performed well.
While the group does not separately disclose Vietnam&rsquo s sales, the group&rsquo s Southeast Asia market (which includes businesses in Vietnam and Malaysia) registered a growth of 9.0% y-o-y in 2Q19, driven by the growth in sales volume in Vietnam.
&ldquo Although there was a slight resurgence in cases in early August, movement restrictions were mostly limited to affected provinces. As such, we do not expect it to have a major impact on the group&rsquo s operations and sales,&rdquo says Kaur.
Overall, the stock is trading at an attractive valuation of 8.6 times FY21 PE, a significant discount to peer average of 20 times FY21 PE despite its market leader position in its core markets in Eastern Europe and growing presence in Vietnam.
Consumer staples ThaiBev, Food Empire to be least affected by Covid-19: RHB
Rising optimism in the market may buoy the consumer sector in the coming quarters, though rising unemployment and overall economic toll from Covid-19 still remain causes for concern, say RHB in an August 28 note. RHB analyst Juliana Cai is maintaining &ldquo neutral&rdquo on the consumer cyclical and non-cyclical sector, preferring defensive staples with some exposure to recovery play.
&ldquo Although we have started to see more optimism in the market as regional economies bottomed out in 2Q2020, the economic toll and rise in unemployment resulting from Covid-19 are likely to persist into 2H2020- 2021. This should pose continued challenges to overall consumption. We expect a full recovery only in 2022,&rdquo says Cai.
Thai Beverage is RHB&rsquo s top pick for the sector, which also includes Food Empire, Kimly, Sheng Siong, Dairy Farm, Delfi, Japan Foods, Genting Singapore and Jumbo Group. &ldquo We believe Thaibev&rsquo s spirits segment (approximately 80% of EBIT) has demonstrated fairly resilient sales and earnings in its 3QFY2020 (Sep) results. Given that the bulk of its spirits product range is consumed at home, sales were largely unaffected by during the lockdown and temporary ban of alcohol sales,&rdquo notes Cai.
Cai is recommending &ldquo buy&rdquo on ThaiBev with a target price of 72 cents.
&ldquo We note that Thailand has relaxed its restriction measures, lifted night curfews, with most people returning back to the office for work. We believe the company stands to benefit from the resumption of activities as sales for beer, non-alcohol beverage and restaurant segments should pick up from here on.&rdquo
With ongoing travel restrictions and rising unemployment in many markets worldwide, Cai notes that the hospitality sector, along with retail and transport, have been badly hit. Tourist-dependent operations will take longer to recover, she adds.
&ldquo Although consumer confidence in the region has bottomed, with most nations relaxing national lockdowns and seeing a gradual resumption of activities, job insecurities, economic uncertainties and, high household debt will continue to weigh down on 2021 consumer sentiment and spending,&rdquo she says.
Cai expects consumer staples to be least affected by Covid-19. &ldquo With many people still working from home, players catering to home consumption should continue to show resilient results. We like Sheng Siong, a staple grocery retailer, which has benefitted from the lockdown and showed tremendous earnings growth in 2Q2020. That said, the market may have priced in a large part of this resilient performance as the stock has significantly outperformed the market YTD.&rdquo
&ldquo We now prefer F& B producers like Thaibev and Food Empire which have strong market share in their respective product segments, fairly resilient earnings and still trading at discounts to their peers and historical mean.&rdquo
watch up for this !!! going to rally soon.
Chiong ah! 70 cents soon
commando ( Date: 15-Aug-2020 12:12) Posted:
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All the way
Joelton ( Date: 15-Aug-2020 12:01) Posted:
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Bright outlook for Food Empire as countries start to wake up and smell the coffee
RHB Group Research is keeping its &ldquo buy&rdquo call on Food Empire with a target price of 75 cents as the stock turned out to be more resilient than expected amid the Covid-19 pandemic.
In its latest 1H20 results, the group recorded earnings of US$13.4 million, just 1.1% higher than the previous year. Revenue was however 4.0% lower y-o-y at US$132.9 million, due to disruptions from a national lockdown in the group&rsquo s main market Russia, as well as the depreciation in Russian ruble.
Production has also been affected by lockdowns, as the group&rsquo s coffee plant in India faced cancellations and postponement of orders from customers.
The lower sales in 1H20 were partially offset by a 3% y-o-y growth in Ukraine, Kazakhstan and Commonwealth of Independent States (CIS) markets, as well as South-East Asia, where sales volumes were resilient and selling prices increased.
But the group managed to cut overall expenses to help boost earnings. Selling and marketing expenses declined by 1.2% y-o-y to $19.5 million, while general and administrative expenses fell 10.5% y-o-y to $16.9 million.
For now, more countries are easing their lockdown restrictions and analyst Juliana Cai believes that this should contribute to earnings improvement for Food Empire.
As Russia eased its restrictions, management highlighted that July and August sales have recovered to more than 90% of pre-Covid levels.
On the other hand, Kazakhstan and Vietnam have implemented another round of lockdowns to combat the resurgence of Covid-19 infections.
Fortunately, the second round of lockdowns were not as strict as the first &ndash and this impact not expected to be worse than what it was in 2Q20.
&ldquo Although there could be short-term disruptions to sales &ndash from movement restrictions and supply chain challenges &ndash we do not expect consumer demand for Food Empire&rsquo s products to be severely impacted by Covid-19, due to its staple nature and low price points,&rdquo says Cai, who reckons that sales will normalise once the Covid-19 situation in markets plateau and consumers become used to the new normal.