Kencana Agri Limited (SGX:BNE), a SGD$97.58M small-cap, is a consumer staples company operating in an industry which has been a consistent performer over time due to its robust consumer demand throughout economic cycles. Consumer staple analysts are forecasting for the entire industry, a relatively muted growth of 5.82% in the upcoming year . Today, I’ll take you through the sector growth expectations, as well as evaluate whether Kencana Agri is lagging or leading in the industry. View our latest analysis for Kencana Agri

What’s the catalyst for Kencana Agri’s sector growth?

Disruption from consumers is becoming more prominent than that of industry competitors. Many consumers now prefer to buy whole, raw ingredients and prepare more of their meals at home. Furthermore, companies that are now emerging are latching on these trends with efficient business models. Over the past year, the industry saw growth of over 50%, beating the Singapore market growth of 7.92%. Given the lack of analyst consensus in Kencana Agri’s outlook, we could potentially assume the stock’s growth rate broadly follows its food product industry peers. This means it is an attractive growth stock relative to the wider Singapore stock market.

Is Kencana Agri and the sector relatively cheap?

The food product sector’s PE is currently hovering around 11x, relatively similar to the rest of the Singapore stock market PE of 14x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 9.96% compared to the market’s 7.94%, potentially illustrative of past tailwinds. On the stock-level, Kencana Agri is trading at a PE ratio of 6x, which is relatively in-line with the average food product stock. In terms of returns, Kencana Agri generated 27.89% in the past year, which is 17.93% over the food product sector.

What this means for you:

Are you a shareholder? Food product stocks are currently expected to grow faster than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards high-growth. The industry is trading relatively in-line with the market, which means you may be paying a fair value for the consumer stocks should you wish to accumulate more of your holdings.

Are you a potential investor? If you’ve been keeping an eye on the food product sector, now is the right time to dive deeper into the stock-level. The high growth prospect makes stocks such as Kencana Agri a more appealing investment case, though the industry is trading relatively in-line with the rest of the wider marker. I suggest you examine the stock’s fundamentals, such as its financial health, before you make an investment decision.