• Keep BUY with a slightly higher Target Price of SGD0.69, from SGD0.66, 19% upside and 1.5% yield.
• Food Empire's FY18 PATMI of SGD18.1m was in line with our expectation. The company proved to remain resilient, despite volatility in RUB throughout 2018.
• Moving into 2019, we expect Food Empire to show a stronger profitability, as the group de-prioritises non-profitable new projects in some of the new markets.

FY18 Revenue Grew 5.5% YoY

• FOOD EMPIRE HOLDINGS LIMITED (SGX:F03)'s FY18 revenue grew 5.5% y-o-y largely driven by higher sales volumes in most markets, partially offset by the RUB and KZT depreciation against the USD.
• Food Empire continues to see stronger penetration of its products in Vietnam and the market there remains profitable. The overall Indochina market, which Vietnam is classified under, saw 33% growth in sales. However, operating profit for Indochina turned negative on the back of MMK depreciation.
• For FY19F, management is likely to de-prioritise the Myanmar market and focus on growing its strengths in Vietnam. This should have a positive impact on margins.

Our Forecasts Remain Largely Unchanged

• We expect Food Empire to generate mid to high single digit growth in its core markets (Russia and other CIS countries), while Indochina continues to drive the bulk of revenue growth.
• We note that revenue from other markets has remained flat in 2018 as most of its upstream capacity is fully utilised. However, management mentioned it is restructuring its markets in the Middle East, which should bring up revenue and profitability of the other markets segment in 2019.

Source: RHB Invest Research - 04 Mar 2019