Food Empire Holdings

BUY

Target price: $1.00

Jan 17 close: $0.69

Broker: RHB, Jan 16

Caffe Bene is Food Empire's 22 per cent-owned associate. It has been undergoing financial difficulties due to excessive debts assumed prior to the group's investment.

We note that Caffe Bene recently filed for a court-led corporate rehabilitation process and is currently awaiting its approval. Based on our estimate, the group has an exposure of about US$10 million (S$13.2 million) to Caffe Bene, representing 4 per cent of its market capitalisation. We think this is the maximum impairment if Food Empire writes off its entire equity stake in the coffee house chain and shareholders' loans.

Maintain "buy", with an unchanged target price of $1. Food Empire remains our top pick for Singapore's consumer sector this year.