Brokers’ take: RHB raises Food Empire target to S$1.39 after FY2022 earnings surprise
Michelle Zhu
RHB Research is upbeat on Food Empire ’s earnings prospects for FY2023 after the food and beverage manufacturer’s latest set of full-year financial results surprised on the upside, driven by strong revenue growth in Russia and Ukraine.
The brokerage maintains its “buy” call, while raising its price target to S$1.39 from S$0.95, to reflect an estimated FY2023 dividend yield of 5.8 per cent.
Analyst Alfie Yeo on Thursday (Mar 16) said this dividend should be supported by the group’s strong operating cash flow of over US$70 million, with about US$90 million in net cash.
In Yeo’s view, the stock trades at a “compelling” six times price-to-earnings multiple based on FY2023 estimates, which is one standard deviation from its mean of nine times. The higher price target is based on a multiple of 10 times.
The group’s FY2023 to FY2024 core earnings projections have been lifted by 33 to 35 per cent on a higher FY2022 base. Revenue estimates for the period were also raised by 8 to 13 per cent.
Yeo also foresees more efficient operating expenditure and higher operating margins for the group at its current run-rate – an estimate of a company’s earnings based on reported data – which he believes is “sustainable, premised on better leverage and economies of scale in Russia”.
According to the analyst, Food Empire’s outlook remains stable for its key markets in Russia and Ukraine as their retail channels and supply chains remain unaffected amid geopolitical tensions.
“As a brand owner, Food Empire was able to sustain its profitability better than distributors and retailers, especially in Russia and Ukraine,” he said of the group’s FY2022 financials.
As at 11.22 am on Thursday, shares of Food Empire were S$0.01 or 1.2 per cent higher at S$0.88.
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