Food Empire

[cif5000]

Q1.) Reading through 2011 AR pg111/note24, noticed the 'trade receivables past due but not impared' has increased >100%
2010 : U$4,628,000
2011 : U$10,890,000

comparing with SuperGroup's trade receivables
2010 : S$72,339,000
2011 : S$80,015,000

However, under FE's financial risk mgmt on pg134/note39a, it states
"trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment with the Group."

Does it means U$10,890,000 is owed by uncreditworthy debtors?

Hello my friend, may I offer some comment?

Note 39 is on risk management. It tells how the management thinks if a risk is ok or not ok. If the receivables is not past due and not impaired, that means they think the risk is ok. If it is past due or impaired, then they will present it in Note 24.

Q2.) pg100/note13
The valuations are estimates of the amounts for which the assets could be exchanged between a knowledgeable willing buyer and knowledgeable willing seller on an arm’s length transaction at the valuation date. The fair value of the investment properties is determined at US$11,937,000 (2010: US$4,660,000).

There is a gain of fair value of U$7,277,000, but it is not reported under 'CashFlow from operating activities/ Gain on Fair Value of Investment Properties"?

At the end of FY10, the investment properties are carried at $4.53m and valued at $4.6m (page 99). During the year, they added more properties worth $6.4m at cost. The final carrying value was $10.8m with a valuation of $11.9m. The discrepancy is not that great (~1.1m). A simple explanation is that those they bought appreciated by end of year or they bought them at below valuation. Remember that new addition is carried at cost at first and then at valuation in subsequent years.

There is no "Gain of Fair Value of Investment Properties" in FY11. The difference was due to addition. Fair value gain is shown with a line entry in the P&L (e.g. Noel Gift), or included in Other Income (e.g. LHT). The cash-flow statement will show then show corresponding adjustment to these entries.

[nitro]

Q1.) Reading through 2011 AR pg111/note24, noticed the 'trade receivables past due but not impared' has increased >100%
2010 : U$4,628,000
2011 : U$10,890,000

comparing with SuperGroup's trade receivables
2010 : S$72,339,000
2011 : S$80,015,000

However, under FE's financial risk mgmt on pg134/note39a, it states
"trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment with the Group."

Does it means U$10,890,000 is owed by uncreditworthy debtors?

Hello my friend, may I offer some comment?

Note 39 is on risk management. It tells how the management thinks if a risk is ok or not ok. If the receivables is not past due and not impaired, that means they think the risk is ok. If it is past due or impaired, then they will present it in Note 24.

Q2.) pg100/note13
The valuations are estimates of the amounts for which the assets could be exchanged between a knowledgeable willing buyer and knowledgeable willing seller on an arm’s length transaction at the valuation date. The fair value of the investment properties is determined at US$11,937,000 (2010: US$4,660,000).

There is a gain of fair value of U$7,277,000, but it is not reported under 'CashFlow from operating activities/ Gain on Fair Value of Investment Properties"?

At the end of FY10, the investment properties are carried at $4.53m and valued at $4.6m (page 99). During the year, they added more properties worth $6.4m at cost. The final carrying value was $10.8m with a valuation of $11.9m. The discrepancy is not that great (~1.1m). A simple explanation is that those they bought appreciated by end of year or they bought them at below valuation. Remember that new addition is carried at cost at first and then at valuation in subsequent years.

There is no "Gain of Fair Value of Investment Properties" in FY11. The difference was due to addition. Fair value gain is shown with a line entry in the P&L (e.g. Noel Gift), or included in Other Income (e.g. LHT). The cash-flow statement will show then show corresponding adjustment to these entries.

Thnx, your 7 sentences explained everything.

[desmondxyz]

nowadays selling coffee earns more money than banks....make sure u have some 3in1 in your pocket.....^_^

[Maxy]

anyone still holding on ?

[freedom]

Big trouble in Russia and Ukraine, large markets for Food Empire.

It all depends on whether you can sit out the trouble period.

[snowcap]

I was vested from 2004 to around 2010 (cant remember when I divested).

My (amateur) take on this is that people will still need to drink coffee. So yes, in the long run should be okay.

But in the short run, the Ukraine and Russia markets will be affected... specifically how, I'm not clear because I have not followed since I divested.
Some things I can think of: Distribution of inventory may be disrupted. Regulatory compliance and/or licensing may be disrupted if Ukraine becomes part of Russia.

Why I divested was for a totally different reason. I noticed at one AGM that then-CEO Tan Wang Cheow was very proud of all his marketing efforts. MacCoffee sponsors many sporting events like rally races and figure skating. However, when probed, he mentioned that branding is something that you have to continually do. This is a sign that there is no "moat". Instead, the attackers are always beating at your castle door, and you have to expend your soldiers (advertising budget) to defend against them.

Also, Food Empire is fighting against giants like Nestle. So I let go.

[Tiggerbee]

Between Super, Food Empire and Oldtown, I prefer Oldtown as it has both F&B and FMCG biz. ALlhough Oldtown's FMCG biz has only managed single digit growth in the past 2 years, it's FMCG biz had grown 27% in the past 9 months and 36% in the most recent qtr. Net profit margin of its FMCG biz reach 20% vs 14% for Super. Among the three, Food Empire faces the most headwinds. It's facing higher COGS that impact its gross margins and depreciating ruble and hryvnia that hit both top and bottom line.

Super's growth has also stalled for the last 2 qtrs, confirming that Q3 2013's results was not a blip but might be a fundamental change that might persist for the next few qtrs. On the other hand, Oldtown's FMCG biz is raging ahead with expanded capacity. The company has also penetrated the Thailand and Taiwan market and has start attacking the China market.

There is low expectation for Oldtown's F&B biz which might surprise on the upside once they manage to grow its franchise in Indonesia and China. It's currently priced at about 15x PE at estimated 0.124 sen EPS (based on RM$1.86 closing price). Last 9M EPS was 8.91 sen. The FMCG biz now contribute 48% of its revenue and 57% of its Q4 2013 profit.

You can check out Oldtown IR web site, which is one of the best IR web site I've came across.

http://oldtown.irplc.com/

[butcher]

Business still going on but the problem is the devaluing of the Russian and Ukraine currency.

[(cy)]

hasn't Food Empire always been known as a proxy play to the Russian markets given their extensive geographical exposure there? not sure if it is a classic situation of market inefficiency at work in the Singapore market but Russian Ruble is actually one of the top performing currencies worldwide (ytd performance) yet Food Empire is still suffering from such depressed valuations.

also interesting to note that volume has been more than usual this week. any thoughts on this counter?

[sgd]

well for sure people still need to eat and drink coffee get by in war torn places. But what looks bad now could also get worse the fighting is in one area in the south but could spread. The company I see reports in USD but earns in rubles or ukraine currency and ruble lost a lot of value after sanctions, after currency translation it will turn into loss no matter if your original return was positive, the company market exposure to Russia Ukraine and lesser extend to Iran --- All these countries are now under sanctions talk about triple whammy.

the americans and russians both claim they don't have troops on the ground in ukraine but the americans have stopped using troops anyway in Iraq they relied heavily on blackwater contractors and what about the russians I'm sure they have their own military contractors too they claim those are volunteers, who is to say both are not using contractors and claiming there are no troops on the ground. if nobody adding fuel there would not be any fire.

big uncertainty in ukraine is it will spread into a full blown civil war it becomes like lebanon carved up into fiefs then costs for logistic and transportation going to skyrocket.