21 June 2014

Neo Group Annual Report FY2014 Summary - June 2014

Neo Group is number one event caterer in Singapore. The Group served 1,118 events around Singapore on 31 January 2014, up from the Singapore record of 1,005 events catered for on the first day of Lunar New Year last year. This has been officially recognised by the Singapore Book of Records as of 28 February 2014 and marks another milestone in the Group’s achievements.

The business of Neo Group is categorized into two main groups:
  • Food Catering business, the Group supplies a comprehensive range of quality food and buffets to diverse clientele through our “Neo Garden Catering”, “Orange Clove Catering”, “Deli Hub Catering” and “Best Catering” brands. In 2012, the Group was ranked as the number one events caterer in Singapore with a 9% share of the $306.6 million events catering market.
  • Food Retail business, the Group operates a successful chain of 22 “umisushi” food retail outlets island wide and 1 licensed outlet in Jakarta as at 31 January 2014, offering Japanese convenience foods as well as delivery services. Targeting students, working adults and young families, its outlets are located island-wide in accessible locations mainly near MRT stations and in shopping malls. The group is targeting to have total 30 outlets by 2016 and 100 outlets in long run. The group is also targeted to launch two Japanese style restaurants by this year (FY2014).
In the second quarter of 2014, Neo group will be completing most of our centralised kitchen at 1 Enterprise Road. Located on a land area of approximately 75,018 sq ft, the kitchen will deploy increased mechanization and incorporate modern food preparation techniques for greater productivity and efficiency as well as consistency in food quality and hygiene. When operational, they expect the centralised kitchen to further increase efficiency and enable them to ramp up daily catering capacity by three to four times.

Snapshots of Financial Result:

My View

Neo Group is now expanding / diversifying its cash flow game via venturing into Japanese restaurant business by this year (FY2014). So if we look on Japanese Restaurant Operator in Singapore - Japan Food, the PE is below 20X with net profit margin of about 50%.

Nonetheless with Trailing PE of more than 20 X, it appeared expensive. But with market cap of around S$100M - S$200M, it really depends on your belief / after your homework of whether the group can grow faster in next 5 years to make a net profit of S$20M and above so that the forward PE could be reduced to below 10X. It is about 2% - 3% trailing dividend yield based on current market price.

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