DBS Group Research (DBS) analysts Chee Zheng Feng and Andy Sim have a fair value estimate of between $2.35 and $3.01 on Food Empire Holdings, with the midpoint being $2.68.

 

The analysts&rsquo sum-of-the-parts (SOTP) valuation implies an equity value of US$1.1 billion ($1.41 billion) to US$1.4 billion on the company. &ldquo We value the company using a sum-of-the-parts approach, covering its four key business operations &mdash East Europe branded instant coffee, snack manufacturing in Malaysia, food ingredient business in Southeast Asia and South Asia, and Vietnam branded instant coffee,&rdquo write Chee and Sim in their Aug 28 note.

 

Year-to-date (ytd), Food Empire&rsquo s share price has risen by 130%. The analysts attribute this to the group&rsquo s resilient 2HFY2024 ended Dec 31, 2024, results despite rising coffee prices, continued strong top-line growth in the 1QFY2025, and falling coffee prices supporting an earnings turnaround.

 

In their un-rated report, Chee and Sim first note that the group dominates the 3‑ in‑ 1 coffee segment in Russia, Ukraine, Kazakhstan and other commonwealth of independent states (CIS) markets in East Europe, with a significant majority market share of over 60%.

 

Given the geopolitical risk and earnings volatility, Chee and Sim note that branded packaged food and beverage peers generally trade at lower valuations. Applying a median peer valuation of enterprise value (EV)/ earnings before interests and taxes (ebit) on FY2026 ebit, they value the East Europe branded coffee business at US$446 million.

 

With geopolitical risks, they see that the group is mitigating exposure through plans to establish a coffee-mix production facility in Kazakhstan to reduce reliance on Malaysia-based sourcing, costing an investment of US$30 million ($38.5 million) and a target completion by the 4QFY2025.

 

Meanwhile, Chee and Sim note that the company' s snack business is a &ldquo relatively small&rdquo original equipment manufacturer (OEM) business with &ldquo modest&rdquo growth prospects. Applying a median peer valuation of 12 times EV/ebit on FY2026 segment ebit, they value the snack manufacturing business at US$27 million.

 

As for Food Empire&rsquo s food ingredient businesses in South East Asia and South Asia, the analysts have selected food ingredient players with comparable revenues of US$10 million to US$300 million to obtain their valuation.

 

&ldquo We value the creamer ingredient business at a median 6.4 times EV/ebit on FY2026 segment ebit, translating to US$26 million. Given its high over 20% ebit margin, we value the soluble coffee business at the upper quantile between 50th and 75th percentile, between 6.7 times to 11.1 times EV/ebit, translating to valuation range between US$181 million to US$300 million,&rdquo write Chee and Sim.

 

On the group&rsquo s Vietnam instant coffee segment, they have benchmarked it against global peers in the branded consumer space with similar revenue growth at between 20% to 50%.

 

With the company in a &ldquo growth stage&rdquo , reinvesting most of its profits into new product innovation, Chee and Sum believe an EV/revenue valuation would be &ldquo more suitable&rdquo .

 

They write: &ldquo With growth at over 30%, we value it at 50th to 75th percentile range, 2.8 times to 4.4 times EV/revenue, translating to valuation range between US$307 million to US$483million. We believe the multiples applied are reasonable based on growth profile referencing similar branded instant coffee past transactions.&rdquo

 

They add: &ldquo In recent years, Food Empire has also made significant inroads into growing its branded instant coffee business in Vietnam and expanding its coffee ingredient business in South Asia and Southeast Asia, with a new freeze-dried soluble coffee plant planned in Vietnam.&rdquo

 

On Asean-based private equity fund manager, Ikhlas Capital&rsquo s US$40 million investment into convertible notes, Chee and Sim note the move as &ldquo a game changer&rdquo , anchoring valuation and providing a network for future growth opportunities.

 

They write: &ldquo Notably, the recent AirAsia partnership to co-develop and launch a new ready-to-drink range stemmed from this tie-up, as Tony Fernandes, Air Asia CEO is one of the investors in Ikhlas. This hints at further agreements potentially in the pipeline to broaden Food Empire&rsquo s Asean market access.&rdquo

 

Ikhlas transaction&rsquo s liquidity event values the company at a floor of $2.18 a share, while Food Empire&rsquo s Southeast Asia and South Asia assets are &ldquo crown jewels&rdquo with a floor value of US$800 million.

 

Chee and Sim write: &ldquo Applying a median 6.4 times EV/ ebit multiple to its East Europe assets on our FY2026 ebit estimates gives a valuation of 95 cents a share, bringing total value to $2.73 a share.&rdquo

 

Moving forward, the company is also seeing robust demand for coffee-related food ingredients, such as soluble coffee and non-dairy creamer.

 

&ldquo It recently expanded its non-dairy creamer facility in Malaysia, with full utilisation expected by 2027. In the soluble coffee segment, its Indian facility is already running at full capacity,&rdquo write Chee and Sim.

 

To capture further growth, Food Empire has committed US$37 million to expand India&rsquo s spray-dried capacity by 60% and US$80 million to build a greenfield freeze dried facility in Binh Dinh, Central Vietnam.

 

The analysts add: &ldquo The company sees strong demand for soluble coffee, with Vietnam likely chosen given its strong cost economics, free trade access, strategic location for Asean market distribution, and ability to complement the branded coffee business in Vietnam in future.&rdquo

 

Catalysts noted by Chee and Sim include an earnings turnaround with lower coffee prices and potential acquisition targets. Conversely, risks include geopolitical uncertainties and foreign exchange (forex) risks, particularly with the Russian ruble and the resurgence of coffee prices.

The instruments will be distributed on local exchanges ADDX, DigiFT and HydraX

 

[SINGAPORE] DBS has announced the launch of tokenised structured notes on the Ethereum public blockchain, enabling investors to trade these instruments with greater flexibility.  

 

Structured notes are financial instruments whose value is linked to that of an underlying asset or index. Its structure is often tailored to meet investors&rsquo unique requirements, such as boosting returns or reducing downside losses.

 

The notes will be distributed on the Singapore exchanges ADDX, DigiFT and HydraX, boosting investor access amid growing interest in crypto investments in the Republic.

 

Merchant services received a two-year quarterly high of nearly US$1 billion in crypto in the second quarter of 2024, according to blockchain analysis firm Chainalysis. Not only that, 26 per cent of Singapore residents owned digital assets in 2024, up from 24.4 per cent in 2023, said crypto payments firm Triple-A.

 

DBS itself launched cryptocurrency-linked structured notes in September 2024 for eligible clients, alongside cryptocurrency options trading. Its clients executed over US$1 billion of trades involving these instruments in the first half of 2025, with trade volumes growing almost 60 per cent from the first to the second quarter this year.

 

The move comes at a time when the Monetary Authority of Singapore has been encouraging initiatives such as Project Guardian. That collaborative initiative between policymakers and the financial industry aims to enhance the liquidity and efficiency of financial markets through asset tokenisation.  

 

DBS said on Thursday (Aug 21) that it will also tokenise common structured notes, such as equity-linked notes and credit-linked notes.

 

Tokenisation: the next frontier of financial markets infrastructure

Structured notes are complex instruments that usually require an investment of at least US$100,000 and are often non-fungible.

 

Tokenisation instead creates individual tokens each representing a mere US$1,000 share of the original note. These tokens are also identical to each other, making them more fungible.

 

This allows for easier access to structured note tokens, with investors enjoying greater flexibility with their investments.

 

The DBS partnership with third-party ADDX, DigiFT and HydraX &ldquo broadens access to tokenised structured notes for accredited and institutional investors who are not DBS clients&rdquo , said the bank in a statement.

 

For the first token distribution, DBS said that it will tokenise cash-settled cryptocurrency-linked participation notes for distribution across the third-party digital platforms. 

 

&ldquo The note structure provides investors with a cash payout when cryptocurrency prices rise, enabling them to build exposure to the asset class without having to manage any cryptocurrency,&rdquo it added. &ldquo The note is also structured to mitigate potential losses should cryptocurrency prices decline.&rdquo

 

Li Zhen, DBS&rsquo head of foreign exchange and digital assets, global financial markets, described asset tokenisation as the &ldquo next frontier of financial markets infrastructure&rdquo .

 

He added: &ldquo By leveraging DBS&rsquo strong credit ratings, partnerships and capabilities, more investors can now tap our solutions to better manage their portfolios.&rdquo

 

DBS Group Holdings remains the banking sector top pick for the team at RHB Bank Singapore amid a generally &ldquo tough&rdquo 2QFY2025.

 

This comes as the bank&rsquo s 1HFY2025 patmi, which came in at 53% of RHB&rsquo s and the consensus&rsquo FY2025 estimates, was the only one to meet expectations. Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) missed expectations due to weaker-than-expected net interest incomes (NII) and net interest margins (NIMs). UOB&rsquo s loan growth also missed the mark while its loan provisions stood higher than forecasted.

 

During the quarter, the sector&rsquo s 2QFY2025 patmi fell by 3% y-o-y and 5% q-o-q due to weaker operating income. Overall NIMs fell by 9 basis points q-o-q and 16 basis points y-o-y with the declines in benchmark rates coming through.

 

On a q-o-q basis, the lower sector patmi was attributed to the sequentially lower NII and non-interest income while the y-o-y drop was mainly due to higher loan impairment allowances and a higher effective tax rate after the adoption of the global minimum tax rate.

 

Overall, annualised loan growth stood at 2% as domestic-driven growth was slightly offset by the impact of foreign exchange (forex). At the same time, annualised deposit growth stood at 4% as banks continued to enjoy ample liquidity from continued liquidity inflows.

 

Sector non-interest income fell by 6% q-o-q due to softer fees and lower other non-interest income. The lower q-o-q fee were attributed to the absence of deal-related fees seen in the previous quarter. Non-interest income, however, was up by 8% y-o-y on higher fees.

 

Cost-to-income ratio (CIR) was up by 2 percentage points q-o-q to 41% due to weaker operating income.

 

Meanwhile, asset quality was generally &ldquo stable&rdquo despite isolated new non-performing asset (NPA) incidences.

 

The sector&rsquo s credit cost stood at 19 basis points compared to 1QFY2025&rsquo s 30 basis points while the gross non-performing loan (NPL) ratio eased by 5 basis points q-o-q to 1.15%.

 

During the reporting quarter, the RHB team lowered its FY2025 to FY2027 sector patmi by 3%, 2% and 1% respectively due to the downgrades in forecasts for OCBC and UOB.

 

Following the changes, sector profit before tax (PBT) for FY2025 is expected to decline by 4% y-o-y while sector FY2025 patmi is expected to fall by 6% y-o-y due to a 3% y-o-y decline in NII from NIM compression and higher credit costs.

 

In FY2026 to FY2027, the team expects patmi to rebound with a 4% y-o-y growth underpinned by stronger non-interest income.

 

The team also expects the banks to see a weaker 2HFY2025 attributed to a combination of seasonal factors and uncertainties pertaining to global trade from the US tariffs.

 

RHB has a &ldquo buy&rdquo call for DBS and &ldquo neutral&rdquo calls for OCBC and UOB. The team' s target prices for DBS, OCBC and UOB are at $52.80, $17.50 and $38.80 respectively.

 

Year-to-date (ytd), Singapore banks have posted double-digit total returns, &ldquo significantly outpacing&rdquo its Malaysian and Indonesian counterparts, but lagging in comparison to the Straits Times Index.

 

&ldquo In our view, Singapore banks&rsquo relative regional outperformance has been aided by attractive dividend yields and the flight-to-quality to Singapore dollar (SGD) assets. Upon closer examination, though, we note that the overall sector performance was skewed by DBS&rsquo s strong returns while both OCBC and UOB continued to lag,&rdquo the team writes.

 

&ldquo We believe DBS&rsquo s outperformance was aided by its strong dividend visibility as it continues to focus and guide on absolute dividends. Dividend yields remain attractive. A resilient set of 2QFY2025 results have also been received positively,&rdquo it adds. &ldquo On the other hand, both OCBC and UOB were laggards. Both results missed estimates this quarter, and both banks also reduced their interim ordinary dividend per share (DPS) due to the decline in 1HFY2025 profitability.&rdquo

 

DBS Group Research has kept its " hold" call on Yanlord Land Group following its most recent 1HFY2025 results. Nonetheless, DBS is getting more upbeat on this stock, given how the China-based property company is moving towards the end of its multi-year debt repayment cycle. To reduce debt, Yanlord has suspended dividends.

 

With constant repayment, totalling some US$121 million year to date, Yanlord is left with just one offshore senior note of some US$379 million outstanding in the public bond market. " Yanlord has been conservative and maintains a defensive strategy to manage its cashflow and liquidity, key priorities since the start of the property downcycle," states the DBS analysts Jason Lum, Dexter Chun and Ben Wong in their Aug 18 note.

 

With some RMB8.6 billion in unrestricted cash on hand as of June and the continued sell-down of its projects, with some RMB30 billion in saleable resources planned for launch in the current FY2025, Yanlord appears well positioned to pay down debts and emerge from the multi-year deleveraging phase, says DBS.

 

However, in the near term, no thanks to the ongoing down cycle in China' s property market, Yanlord' s development business will continue to cloud its earnings outlook. In the most recent 1HFY2025, gross profit margin was a better-than-expected 32.3%, versus the industry average of 15%, mainly due to a shift in the mix of projects delivered.

 

DBS warns that the seemingly high margin is not sustainable, particularly with continued ASP declines since 2Q25 and lack of new project contributions will likely weigh on the margin outlook in 2HFY2025 alongside further inventory impairment risks.

 

On the other hand, its recurring businesses, including rental and property management, remain resilient.

 

The DBS analysts have raised their FY2025 and FY2026 earnings forecasts to reflect better margin assumptions. However, these two years are likely to remain loss-making.

 

From an earlier target price of 50 cents, DBS has raised the target price to 58 cents, which is pegged to a 0.2x one-year forward PB, in line with the average level seen during Dec 22 - Feb 24 when Yanlord repurchased its offshore notes