12 August 2014

Breadtalk Quarterly Report Summary - August 2014

Breadtalks 1H14 revenue recorded a 13.6% increase to S$280M compared to S$246M corresponding period last year, but net profit registered a 4.9% drop to S$4.4M, mainly due to S$2.2M asset write off for the closure of non-performing outlets. The food atrium is the best performer as revenue increased by 20.9%. The other income increased by 113% mainly due to the monies received for Singapore's Wage Credit Scheme and management fees from its food court operations.

1H14 EPS 1.57 cents compared to 1.65 cents last year, NAV stood at 33.6 cents comapared to 30.1 cents a year ago. It implies an expected annualized ROE of around 10% - 12%. Company declared 0.5 cents interim dividend to be paid on 5 September 2014. 

Cash reduced by S$21.6 million mainly due to payment for the investment in Perennial Somerset Investors (for the acquisition of TripleOne Somerset, a 17 storey commercial building with a 2 level retail podium and 2 separate basement car parks, located in prime Orchard Road precinct next to Somerset MRT station). 

Number of outlets (including franchise):              
                      Jun14              Dec13

Bakery:           751                  737            Up 1.9% 
Foot Atrium:     59                    58            Up 1.7% 
Restaurant:        34                   41        Down 17.1%
                       ----                 -----  
Total:              844                  836             Up 1.0% 
                       ----                 -----  

Company Comment on the Outlook

On 1 August 2014, the Group announced its joint venture partnership with Minor Food Group (MFG) to operate and grow the Breadtalk brand in Thailand. This co-operation will enable Breadtalk brand to leverage on MFG’s established platform in Thailand, such as supply chain management, legal, franchising, outlet expansion and property management.

In the second half of the year, the Group will continue to focus on consolidating its Ramen Play business which may involve further closure of non-performing outlets. In addition, it will push on its cost rationalisation plan to achieve better efficiency in the back-end support as well as improving the quality of service and offering at the frontline. Barring any unforeseen circumstances, the Group expects to remain profitable for the rest of FY2014.

My Notes

Few months ago, I learnt from news that Breadtalk boss was quite ambitious in his expansion plan in Greater China region. So far, I have not seen the impact yet. The net profit margin is still very thin compared to other competitors in food and beverages sector. Hopefully with few more quarters later, we could see a better result by the company. 

With expected annualized PE of 42X, I would say this is a bit expensive now if the group still unable to improve the net profit margin in near term.  

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