Food Empire

Food Empire | NEUTRAL

Aug 15 close: 55.5 cents

Target price: 60 cents

Broker: RHB Research, Aug 15

We believe the group is heading in the right direction in the long run by diversifying into Asia.

However, with the United States imposing more sanctions on Russia, we expect more downside risks from the depreciation of the rouble and its regional currencies. Hence we see limited reasons to be vested in Food Empire over the near term, given that 60 per cent of its revenue is generated from Russia and other Commonwealth of Independent States (CIS) countries.

Food Empire recorded forex loss of US$2 million (S$2.7 million) in second-quarter FY2018 as the rouble and euro weakened against the US dollar. We note that the group derives 40 per cent of its revenue from Russia and has loans (for the purchase of equipment at its new plant) denominated in euros. The forex loss represented 55 per cent of pretax profit, dragging it down 20 per cent compared to the second quarter of FY2017.

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