Food Empire

[Coco]

FOOD EMPIRE: A tale of unexpected windfall despite 1H2022 storm
https://nextinsight.net/story-archive-ma...ood-empire

There were savings from cutting sales & marketing expenses, so this helped the bottomline.
Big forex gains from ruble jump, which touch wood can swing the other way in future, or not.
Overall, core kopi sales shown to be steady biz.

[weijian]

@BlueKelah,
This probably not a "3-foot hurdle" type of investment. A lot of things need to be going right AT THE SAME TIME for it to work. If one pulls out the share price chart from yahoo finance and look back in the last 17-18 years, it reflects just that.

But the beauty of value investing is never say never. People with the right temperament, resources and hence well suited to take on the brain damage, may prosper where otherwise sceptics stop after taking a peek.

Your "70% top shareholder holdings" portion includes Anthoni Salim who owns a 24% direct stake himself. I am not too sure if Pak Anthoni has a track record of giving meat up for OPMIs....

@Coco,
Thanks for the article. I read that Food Empire signed an agreement to sell their Harrison Road industrial building just 2 months ago. Just a side note, as a Powermatic Data shareholder, I do hope they sell off theirs on Harrison Road as well soon.

[specuvestor]

Just to say that the act of excluding Rubles from SWIFT backfired cause instead of collapsing the Rubles, PetroDollar recycling became PetroRubles recycling. Rubles spiked from 75 pre-Ukraine to hit 120 and now at ~60. I don't think any FX guy was remotely expecting that. That's the macro/FX risk that I mentioned.

Europe, China and India still need Russian Energy at Russia's terms. To expect US to ship energy from US east coast to Europe is a joke since they are IMPORTING on the East coast. Pricing commodities globally other than US$ is no longer uncommon or necessary. Paradigm is shifted intentionally or otherwise. They thought they can make the 2nd largest oil exporter of crude be like Iran.

As for the building sale I guess there might be some technical cash flow issue converting from Rubles.

Not just for Food Empire but for investing in Russia generally, besides the common emerging market risk and elevated political risk, Russian bond crisis in 1998 brought down LTCM with RUB move from 6.5 to around 30 to US$, 2008 devaluation due to oil price collapse from around 23 to 36, then the 2014 devaluation including Crimea annex from around 35 to 80. Now it's 64.50. In 20 years since I met them, the value destruction due to RUB depreciation from 6.5 to 65 is quite remarkable.

When one has mismatch in Asset / Liability currency difference, the pain is more than accounting paper translation loss

Unless one is keen to take Russia risk, like i insinuated above, I don't think they will diversify any time soon.

[BlueKelah]

Hi guys, looks like no one is looking at this instant coffee making counter. Is anyone here vested? It seems as ruble has recovered well post gold pegging, this company is now raking in massive profits. It is also showing very good growth in India segment.

Recent big sale of a property holding to lian beng (45+m vs their ~300m market cap) also means they should be in a strong net cash position and likely able to raise dividends going forward despite upcoming global recession ( people still have to drink coffee, maybe more people especially if coffee shops become too expensive.)

I am not too familiar and will be doing a deeper dive into the company in time but would like to hear what you guys have to say about it currently after their recent good turnaround results.

One thing I am wondering is how come their revenue grows a bit in Ukraine despite the country being in war. Maybe army or locals are constantly stockpiling staples like instant coffee?

At current levels, with the stock price sold down after recent russian war fiasco, looks like a very good buy for next 5-10years as company grows. Especially with >70% top shareholder holdings i think likely to have some sort of privatisation potential?

I am longer term investor for this co after Super was bought out. valuation is not rich and less depending on Russia and Ukraine markets now. As for the privatisation potential, yes, there is such posibility but likely not so soon.

thanks for replying , 

Yes I was thinking it may become as successful as Super? Especially now with the Indian market expansion, which is a massive market, especially if there is a shift from tea to coffee drinking in coming years, we might see revenue from Indian side maybe become main income in a couple years time, as they ramp up sales there, they may even setup factories there? 

I think currently valuation looks undervalued, but it sure looks like a  cash cow at the moment. And not much interest or volume either, which means market hasnt really picked up on this small cap gem in the making.

@COCO : yes thats the article that piqued my interest.

@ weijian : thanks for noting the big shareholder, Anthoni Salim is indeed an important shareholder to consider, however past 3 years the payout has been increased and stable at 2c-2.2c which is the standard of 30% of earnings with payout not decresed last year despite earnings going from 66/68c down to 48c. So I think he might not be interfering with this company much in terms of sucking value out of it. it seems cash in the company has been stable 60m for quite a few years now, only reddish flag might be that debt has gone from 5m to 30mUSD now, but overall company still net cash, and will be about 16% net cash when more cash comes in from property sale. Stripping out forex gains, EPS is still 4.18c SGD for 1H2022 and likely to be 8c or higher later this year(stripping out 20mSGD gains from property sale) Company did some share buybacks post results release @54c and has 9.7m treasury shares now vs 530+m total shares. Not sure what they will do, probably use as future stock options? Would Anthoni Salim privatise this cash cow (at a cheap cheap price) using his funds from indofood group?

@specuvestor : The company i think is now diversifying quite nicely into the Indian market which may end up a very very massive growth driver. Russia/China could have a big recession and massive currency devaluation from coming global recession but that would probably be a temporary hit to earnings, the underlying business should still survive and rebound sharply post recession. IMHO the world is moving away from USD as well, so the BRICS new currency system may actually make the ruble even stronger as its backed by gold and commodities now as we can see even in war times and massive sanctions russian ruble is still doing fine post "gold peg" Russia is also using chinese CIPS banking network to trade with BRICS and other nations, doesnt need SWIFT anymore. Plus in the works to start a russian gold exchange to rival LBMA /COMEX (we may get an actual price discovery in gold shooting it up to maybe 3kUSD level or maybe even 5x tot 10x like in the 1970s inflation decade, that would make both china and russia suddenly become very very rich nations, especially with additional capital inflows if they are successful in creating the next reserve currency)

[BlueKelah]

Resume Share buybacks this week @54c.
I believe they are buying more today, no idea how much they are going to buy though. lol..
Boss also exercised 1.5mio stock options an increase his stake a abit.

@vested

[xierwang]

Resume Share buybacks this week @54c.
I believe they are buying more today, no idea how much they are going to buy though. lol..
Boss also exercised 1.5mio stock options an increase his stake a abit.

@vested

Going to double your investment cost if you stay invested.  Reach an all time high now. 

Congratuation!

[BlueKelah]

Resume Share buybacks this week @54c.
I believe they are buying more today, no idea how much they are going to buy though. lol..
Boss also exercised 1.5mio stock options an increase his stake a abit.

@vested

Going to double your investment cost if you stay invested.  Reach an all time high now. 

Congratuation!

closed $1.30++ recently after a spike in mid-Jan which I have no idea why, maybe russian economy now doing well. They increased dividend last year and business seems stable so I just hold. looks like it could be a $2 stock soon if their india expansion is successful.

[dreamybear]

The AGM minutes mentioned expansion challenges. Well, FE is able to find success in Vietnam, perhaps Indonesia is a matter of time.

As an aside, it does seem cracking new markets for a business is a long drawn process.
https://www.businesstimes.com.sg/events-...ion-empire
"What was meant to be a brief stint, however, turned into a decade-long residency in Shanghai. “I did not realise it would take me 10 years to crack the market,” he admits."

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https://links.sgx.com/FileOpen/Food%20Em...eID=803737

Q14 Question : "Shareholder 5 enquired about the lack of progress in Indonesia despite collaboration with the Anthoni Salim Group and inquired about the allocation of the Company's marketing budget in the region."
Q14 Answer : "The Chairman explained the challenges faced in Indonesia, including fierce competition and limited profitability, hindering the Group's ability to gain a strong foothold despite initial efforts. He clarified that partnerships with the Anthoni Salim Group in Indonesia are subjected to standard commercial terms and remained at arm's length..."

Q17 Answer : "The Group CEO provided an overview of the competitive dynamics in Vietnam, highlighting fierce competition among key major players. He expressed satisfaction with the Company's performance, noting stable or improved market share driven by volume growth, with the Group currently ranked as the fourth leading brand. He highlights the difficulty of achieving significant market share in the region given the competitive landscape."

https://www.nextinsight.net/story-archiv...viet-visit
"Key to building up a wide street shop distribution network is the in-house sales force of 930 people that regularly visits these shops. Each sales staff visit almost 30 shops per day for sales updates, customer feedback and replenishment of inventory. "