Food Empire - UOB Kay Hian 2023-03-01: Record-High 2022 Earnings & Dividend; Expect Strong Performance Ahead

• Food Empire reported core earnings of US$45m (+134% y-o-y), pulling off a record high and forming 125% of our estimates. Higher revenue across all but its South-East Asia segment and improved profitability contributed to the strong performance.
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• We raise 2023 and 2024 core earnings forecast for Food Empire by 33% and 41% respectively. Maintain BUY with a 64% higher target price of S$1.28 for Food Empire.

Food Empire reported record core earnings; above expectations.

• Food Empire (SGX:F03) reported net profit of US$60.1m for 2022, pulling off a new record high. See Food Empire's announcement dated 27 Feb 2023. Excluding a one-off gain of US$15m from the disposal of non-core assets, core net profit increased 133.7% y-o-y to US$45.1m, outperforming our expectations and forming 125% of our estimates.
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• Food Empire's largest market, Russia, reported revenue growth of 29.1% to S$148.4m, mainly due to strong consumer demand, the appreciation of the Russian ruble against the US dollar, and higher ASP. Similarly, despite fluctuating currencies from geopolitical uncertainties, its Ukraine, Kazakhstan and Commonwealth of Independent States (CIS) segments achieved a 28.6% y-o-y revenue growth.
• However, we note that revenue from the Southeast Asia segment fell 4.2% to US$92.7m, attributable to post-pandemic normalisation in Vietnam, but partially offset by improved contributions from Malaysia’s non-dairy creamer and snacks manufacturing facilities.
• In 2022, Food Empire's selling and marketing expenses fell by 17.2% y-o-y due to lower advertising and promotion expenses, but partially offset by higher manpower costs, as seen by the 11.6% y-o-y increase in administrative expenses. With that, core net profit margin expanded a substantial 5.3ppt to 11.3% in 2022, indicating the group’s successful cost-control measures and optimised operations.

Record dividend payout.

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John Cheong UOB Kay Hian Research | Heidi Mo UOB Kay Hian | https://research.uobkayhian.com/ 2023-03-01 SGinvestors.io

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