Towards Financial Freedom
Food Empire - Key roadshow takeaways
We recently hosted Food Empire for a roadshow in Singapore. Among the key takeaways are: 1) Management has turned more bullish in terms of topline growth, 2) Backward integration plans are on track and should come on-stream in 3Q13. While we raise our FY13/14 revenue growth projections to 17%/21%, our earnings remain largely unchanged as we take into account higher depreciation and start-up costs. We continue to like the firm for its dominant position in Russia and Eastern Europe. Re-iterate BUY with an unchanged TP of SGD0.84. This translates into 16x FY13F P/E vs Super Group which is trading at 26x.
Management more bullish on topline growth. We raise our FY13/14F revenue growth projections from +9/+10% to +17%/+21% as we take into account higher sales from new product launches as well as external sales from its non-dairy creamer plant.
Forecast creamer sales only in FY14. The non-dairy creamer plant has a capacity of 30k tonnes. Based on our channel checks a tonne could fetch ~USD1,500 in the market. We forecast capacity utilization of 70% ie. 24.5k
tonnes in 2014 with 30% ear marked for internal usage. Hence 70% or 17k tonnes at an average ASP of USD1,500 would generate ~USD26m in sales.
tonnes in 2014 with 30% ear marked for internal usage. Hence 70% or 17k tonnes at an average ASP of USD1,500 would generate ~USD26m in sales.
Backward integration plans on track. To recap, the firm will be opening three new plants this year in 3Q13: 1) Non-dairy creamer (capex: USD20m), 2) Potato Chips (capex: USD9m), 3) Packing plant (capex: USD12m).
Net cash of SGD34m + borrowings to fund new plants. Group is sitting on net cash of SGD34m and will rely on bank borrowings for the balance to fund its new plants which will include a coffee plant in India (capex: SD20m) that is expected to be completed in 2014.
Valuation: Maintain BUY with TP of SGD0.84. Our TP of SGD0.84 translates into FY13F P/E of 16x. This compares against Super (SUPER SP) which is trading at 26x and Viz Brandz (VIZ SP) at 15x.
Source: RHB
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
