“We expect demand for the group’s products to remain strong especially in its core markets like Russia and Vietnam,” say the analysts.

Already Food Empire delivered a record FY2022 ended Dec 31, 2022, as revenue grew 24.5% y-o-y to US$398.4 million ($538.1 million). This was driven by growth across most geographical segments, including Russia and the Commonwealth of Independent States (CIS) region and stronger growth from Vietnam, as well as the expansion of its no-dairy creamer facility, which is expected to begin commercial production in 4Q2023.

In India, spray dry and new freeze dry coffee plants continue to operate at full capacity, but the analysts expect that it should yield higher margins due to cost reductions on the back of freight cost normalisation.

“We also expect the next two quarters to be much stronger y-o-y as the conflict started midway during 1Q2022,” say the analysts.

Management has also showed keenness to do more marketing activities in Vietnam. Seet and Ong expect contribution from Vietnam to grow 20% y-o-y in FY2023.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/brokers-calls/rhb-remains-positive-st-eng-its-strong-earnings-potential-and-well?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>RHB remains positive on ST Eng for its ‘strong’ earnings potential and ‘well-supported dividend yield’</a>

Meanwhile, Food Empire has been undertaking share-buybacks in the open market, buying at higher prices than ever before and the analysts expect that to continue as management concur that the company is deeply undervalued and remains confident of their outlook.

“We also expect interim dividends to be a possibility in the near future due to its strong cash flow generation and strong balance sheet,” say Seet and Ong.

Currently, Food Empire is trading at 8.9 times core FY2023 P/E, which the analysts view as “a steep discount” despite strong share price performance recently, compared to both its private and listed valuation of global peers.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/capital/brokers-calls/citi-remains-cautious-nanofilm-amid-uncertain-demand-recovery?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Citi remains cautious on Nanofilm amid uncertain demand recovery </a>

“As such, we think that it could be an attractive target for bigger competitors given its strong presence in Russia and Vietnam,” say the analysts.

As at 2.40pm, shares in Food Empire are trading 2% lower for the day at 97 cents.

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