RHB’s top stocks: Food Empire in, Frencken out

The analyst added Food Empire following its 34.4%YoY net profit growth in Q122.

Food Empire Holdings (FEH) has proven itself to be a good investment following its strong 2022 first quarter (Q1) numbers, RHB said in a report.

RHB said it has added the food and beverage manufacturer to its top mid- to small-cap picks after it reported revenue growth of  7.6% year-on-year (YoY) to $113.3m (US$82.6m) and net profit up 34.4% YoY to $12.6m (US$9.2m) in Q1 2022 “despite the Russo-Ukrainian war inhibiting some segmental numbers and a one-off USD3.2m FX loss.”

The analyst added that FEH’s consumer demand in its key markets has remained firm, whilst demand in its markets within South Asia registered strong growth.

“We have confidence in the resilience of FEH’s business, and believe this consumer staples counter offers investors a sweet bargain - it is trading at just 7.6x FY22F P/E,” RHB said.

Meanwhile, RHB has removed Frencken from its Manufacturing and Technology sector top picks following its 12.6% YoY decline in net profit during 1Q22.

“We believe the margin pressure is likely to sustain and therefore lowered our FY22F profit estimate by 17.5%. This, along with the devaluation of P/E multiples for the global tech sector, would limit the upside
for Frencken,” RHB explained.

Overall, RHB advised investors to buy the stocks that are beneficiaries of the rising interest rates cycle, those that are defensive against rising inflation, and those that will deliver EPS and DPS growth, net margin expansions, and ROE Improvements.

Buying defensive REITs and those that will benefit from the reopening of the economy will also be good for investors, added RHB.