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CHIONG ARH FOOD EMPIRE!!
Not all bleak and gloomy for Food Empire
Broker' s Calls
Samantha Chiew 15/05/2020, 1:57pm
SINGAPORE (May 15): RHB Group Research&rsquo s analyst Juliana Cai is reiterating her &ldquo buy&rdquo recommendation on Food Empire with a target price of 75 cents from 88 cents previously.
On May 11, Food Empire released its business update, which saw net profit after tax fall some 13.3% to US$6.6 million from US$7.6 million, mainly due to foreign exchange losses as the Russian Rubble depreciated as a results from the oil crisis.
Excluding foreign exchange losses, core profit increased by 33% y-o-y US$9.5 million.
Revenue for 1Q20 increased by 5.0% to US$74.2 million, led higher contributions from the group&rsquo s markets in Ukraine, Kazakhstan and CIS South Asia and other markets. This was partially offset by a slightly lower contribution from Russia and Southeast Asia.
Due to the various lockdowns, the company&rsquo s Key Production, Sales and Distribution activities are still continuing but with some disruptions. It is also experiencing weaker offtake from stores in most markets, which is attributable to reduced customer footfall resulting from various forms of movement controls and/or safe distancing measures in these markets.
Food Empire also announced that its second coffee plant project in India, which was initially scheduled for completion and commercial production in middle of FY2020, will experience delays until international travel restrictions are lifted. Its first instant coffee plant has also experienced temporary disruption to production and faced intermittent logistics challenges.
Meanwhile, its The Non-Dairy Creamer, Snacks and Coffee packing facilities in Malaysia continue to operate with some supply chain delays being noted.
Apart from the foreign exchange losses, the company&rsquo s business was fairly stable in 1Q20. But Cai believes that 2Q20 will likely take a turn for the worse with various markets being in some form of lockdown while Russia and most of the CIS countries are seeing the full quarter impact of currency depreciation.
Sales volume in Russia and some of the CIS markets should be more severely impacted as footfall declined sharply for grocery retail. Vietnam, however, is not likely to be severely impacted due to the lower number of Covid-19 cases.
See: Food Empire records robust growth declares higher dividend on better outlook
&ldquo Our sensitivity test suggests that 5% depreciation of the RUB could lower earnings by about 15%, all else unchanged. To mitigate the negative FX impact, we note that Food Empire has implemented about 10% price increase in certain key markets and we expect to see the full impact of the price hike in 3Q20,&rdquo says Cai.
&ldquo In addition, the group is now shifting its focus to higher-margin sales rather than chase topline growth to ensure sustainable profitability. Given it is largely in the staple food business, we believe that full-year sales volume would remain resilient as a whole. We expect sales volume to pick up once the lockdown eases in 3Q20 for most cities,&rdquo she adds.
Nonetheless, revenue estimates for FY20-22 have been cut by 7%, 5% and 4%, respectively and core profit by 17%, 11% and 10%, respectively. This is due to the weaker currency and economic outlook in some of the company&rsquo s key markets.
As at 12.45pm, shares in Food Empire are trading 2% higher at 50 cents or 0.9 times FY20 book with a dividend yield of 2.9%.
https://www.theedgesingapore.com/capital/brokers-calls/not-all-bleak-and-gloomy-food-empire
On May 11, Food Empire released its business update, which saw net profit after tax fall some 13.3% to US$6.6 million from US$7.6 million, mainly due to foreign exchange losses as the Russian Rubble depreciated as a results from the oil crisis.
Excluding foreign exchange losses, core profit increased by 33% y-o-y US$9.5 million.
Revenue for 1Q20 increased by 5.0% to US$74.2 million, led higher contributions from the group&rsquo s markets in Ukraine, Kazakhstan and CIS South Asia and other markets. This was partially offset by a slightly lower contribution from Russia and Southeast Asia.
Due to the various lockdowns, the company&rsquo s Key Production, Sales and Distribution activities are still continuing but with some disruptions. It is also experiencing weaker offtake from stores in most markets, which is attributable to reduced customer footfall resulting from various forms of movement controls and/or safe distancing measures in these markets.
Food Empire also announced that its second coffee plant project in India, which was initially scheduled for completion and commercial production in middle of FY2020, will experience delays until international travel restrictions are lifted. Its first instant coffee plant has also experienced temporary disruption to production and faced intermittent logistics challenges.
Meanwhile, its The Non-Dairy Creamer, Snacks and Coffee packing facilities in Malaysia continue to operate with some supply chain delays being noted.
Apart from the foreign exchange losses, the company&rsquo s business was fairly stable in 1Q20. But Cai believes that 2Q20 will likely take a turn for the worse with various markets being in some form of lockdown while Russia and most of the CIS countries are seeing the full quarter impact of currency depreciation.
Sales volume in Russia and some of the CIS markets should be more severely impacted as footfall declined sharply for grocery retail. Vietnam, however, is not likely to be severely impacted due to the lower number of Covid-19 cases.
See: Food Empire records robust growth declares higher dividend on better outlook
&ldquo Our sensitivity test suggests that 5% depreciation of the RUB could lower earnings by about 15%, all else unchanged. To mitigate the negative FX impact, we note that Food Empire has implemented about 10% price increase in certain key markets and we expect to see the full impact of the price hike in 3Q20,&rdquo says Cai.
&ldquo In addition, the group is now shifting its focus to higher-margin sales rather than chase topline growth to ensure sustainable profitability. Given it is largely in the staple food business, we believe that full-year sales volume would remain resilient as a whole. We expect sales volume to pick up once the lockdown eases in 3Q20 for most cities,&rdquo she adds.
Nonetheless, revenue estimates for FY20-22 have been cut by 7%, 5% and 4%, respectively and core profit by 17%, 11% and 10%, respectively. This is due to the weaker currency and economic outlook in some of the company&rsquo s key markets.
https://www.theedgesingapore.com/capital/brokers-calls/not-all-bleak-and-gloomy-food-empire
Food Empire still has appetite for growth
Food Empire chief executive Sudeep Nair' s somewhat unexpected career journey began with a switch from coding to computers and then to coffee.
The software programmer realised early on that the role wasn' t his cup of tea and turned to computer equipment sales.
It was during a buying trip to Bangkok in 1992 that Mr Nair crossed paths with Food Empire chairman Tan Wang Cheow, who was then running a consumer electronics dealership. The pair hit it off, and the following year Mr Nair threw in his lot with Mr Tan.
" Our business focused on exporting electronics goods to Eastern Europe. As it was a pure trading model, operating conditions could be brutal," Mr Nair, 50, recalled.
" Some of our contacts were interested in sampling new beverages, so we brought over some sachets of 3-in-1 coffee mix. After that, trial orders for the coffee mix took off.
" We didn' t want to handle someone else' s brands. So after our first test product - a 3-in-1 instant coffee mix - was well accepted by the market, we knew we had struck gold."
In 1995, with 40 employees in a small office in Moscow, the MacCoffee brand was born although Mr Nair saw it as more of a hardship posting: " I was hesitant to move to Moscow."
After the Berlin Wall fell in 1989 and the Soviet Union dissolved in 1991, Russia and Eastern Europe were in disarray. Mr Nair said: " Other colleagues who came over stayed up to a month before quitting, and there was no one else left to do the job."
Another hurdle was educating the local, predominantly tea-drinking market: " At that time, no one knew much about instant coffee. Thankfully, the locals were game to try new products."
By 1997, the firm had a multimillion-dollar MacCoffee brand that was taking Moscow by storm. " That was our first high," added Mr Nair.
However, the low wasn' t far behind. The Russian financial crisis struck in 1998 when oil prices plummeted and brought the economy down in one fell swoop.
Fortunately, Russia bounced back over the next two years. Said Mr Nair: " Food Empire returned to growth from 2000, and that year, we successfully listed on the Singapore Exchange."
The group expanded rapidly between 2000 and 2005, spreading its wings to states such as Ukraine and Kazakhstan, but the next trough was just around the corner in the form of the global financial crisis.
By then, the realisation that Food Empire was too dependent on a single market had hit home.
" Our operations were too concentrated and we saw the urgency of diversifying out of this region," Mr Nair said. " But there were many challenges and we didn' t make much headway."
In 2012, he was promoted to chief executive and decided to expand to Myanmar, the Philippines and Vietnam.
" We had tried to penetrate these markets through an export and trading model, but failed because there were too many local players and competition was intense," he noted.
Instead, Food Empire began investing in people and resources to build its brands and then set up manufacturing plants in places like India and Malaysia for key ingredients such as instant coffee, non-dairy creamer and, later, potato crisps.
" Of the three markets, we achieved clear success in Vietnam. We bled for three years and were on the verge of shutting, but finally we turned it around," Mr Nair said.
Over the past five years, Food Empire has grown its Vietnam sales from $2 million to $50 million and won more than 10 per cent share of its market for instant coffee.
The group continues to tweak its blueprint for the Philippines: " Our entry strategy wasn' t quite right, and we' re trying again with a new team and a new direction."
But Myanmar was a failure: " We pulled out of that market last year, largely because of its unstable currency. None of the F& B brands in Myanmar has been able to raise prices, and everyone is grappling with huge margin compression."
A new and immediate challenge is the coronavirus pandemic. " We' ve not seen a direct hit to our supply chain but consumer demand has been affected," Mr Nair said, adding that the strong balance sheet should provide a buffer.
Revenue for the year ended Dec 31, 2019 rose 1.5 per cent to US$288.6 million (S$407.7 million), while net profit jumped 44.9 per cent to US$25.7 million.
Food Empire produces a wide variety of instant beverages such as regular and flavoured coffee mixes, chocolate drinks and flavoured fruit teas. It also markets breakfast cereal, frozen food and snacks. Raw ingredients, like instant coffee and non-dairy creamer, are sold to other food manufacturers.
After nearly 30 years, Food Empire has finally come into its own, noted Mr Nair, who feels a deep satisfaction: " When I was in my mid-20s, financial success was the main goal. Now, seeing how Food Empire has evolved - from a staff of 40 to more than 3,000 now - it' s about enriching people' s lives through the brands and communities we build.
" I tell my staff - don' t look at the large multinationals, focus instead on the small, local businesses which have made their mark."
His biggest muse is wife Irina, whom he met in 1995 when she was working for the firm in Moscow.
And he has some advice for their 21-year-old daughter Anastasia: " I always tell her, whatever you choose to become - a painter, entrepreneur or lawyer - pursue it with all you have.
" Only with determination and passion can you create an impact."
https://www.straitstimes.com/business/companies-markets/food-empire-still-has-appetite-for-growth
Anyone buying this counter?
Seems a good counter to hold for long.
Seems a good counter to hold for long.
Fantastic results...more dividend 2cts!!!
80cts come come...this one no virus..hehe
80cts come come...this one no virus..hehe
Let' s go. Cheers.
chiachiawee ( Date: 10-Jan-2020 21:40) Posted:
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Hope you guys managed to pick up some earlier.
lifeisgood ( Date: 13-Feb-2020 13:14) Posted:
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This stock gonna fly !
yamseng ( Date: 13-Feb-2020 11:57) Posted:
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BB still accumulating, to let those who wish to take profit !!
Watch out !!
Watch out !!
today broke recent high at 72
trading volume hit 3 months High
watch out
trading volume hit 3 months High
watch out
coming !! today has broken recent high at 72
watch out
watch out
More stay at home drink 3-in-1 kopi Russia and Vietnam ah...
https://www.nextinsight.net/story-archive-mainmenu-60/943-2020/13312-food-empire-record-profit-in-2019
https://www.nextinsight.net/story-archive-mainmenu-60/943-2020/13312-food-empire-record-profit-in-2019
all fled to safety stock
engine starts, virus causes food panic
My average 0.628. Let?s enjoy the long ride. Cheers.
Today for no reason up 3.5cents, close at 68.5 cents.
Today highest at 69.5 cents.
Today highest at 69.5 cents.
Today up 2 cents to 60.5 cents. This laggard is moving slowly up. Hopefully the CEO continues to buy
Take a look at SGX website.
Sudeep Nair CEO of Food Empire acquired 1,340,700 shares on 12 November 2019.
Sudeep Nair CEO of Food Empire acquired 1,340,700 shares on 12 November 2019.
SmallSmall ( Date: 12-Nov-2019 12:51) Posted:
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Edging towards $0.60 :)
Chiong Ah ! Feels like another Sarine
Chiong Ah ! Feels like another Sarine
SmallSmall ( Date: 12-Nov-2019 10:12) Posted:
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Nice set of results. RHB has a target of $0.73 I believe.