chili crab

 

When overseas friends ask me what’s the highlight about Singapore, the first thing that comes to my mind would undoubtedly be the FOOD! When I have been overseas for a period of time, other than my friends and family, the next thing that I miss most would be the food.

 

Just thinking about the Bak Kut Teh, Chicken Rice, Chili Crabs, Curry Fish Head, Fried Carrot Cake, Kaya Toast, Laksa, Nasi Lemak, Satay, Tau Huay is getting me hungry. Food is an integral part of our lives. Just think about it, after air and water, the next on our survival list would be food.

 

How Does Food Link To Investing

The next time when you go out of the house to satisfy your hunger, take a look around (Of course after filling our stomachs because we don’t exactly perform well when hungry!) at some of the stores with queues and ask yourself why is there a queue.

At the end of the day, food establishments like cafes and restaurants sell a product – food. And if people are willing to queue outside your store day after day for your product, then you might be on to something.

 

Just Within Singapore Alone, There Are Already Quite a Number of Listed Food Operators

din tai fung 2

 

The ones that many people might associate with could include some of BreadTalk Group Limited’s (SGX:5DA) operating restaurants like Din Tai Fung and RamenPlay. We had previous ran through some of BreadTalk’s operations right here.

 

ajisen

 

Another significant player in Singapore’s F&B industry would also be Japan Food Holdings Ltd (SGX:5OI) with them operating brands like Ajisen Ramen, Osaka Ohsho and Menya Musashi.

 

Now Let Us Show You Some Other Restaurants That You May Not Know Were Operated By A Listed Entity!

 

tung lok

 

1. Tung Lok Restaurants (2000) Ltd (SGX:540)

That’s right the first on our list is TungLok, a place where we can satisfy our chilli crab cravings! The group operated 42 restaurants (26 were the group’s own restaurants) not only in Singapore but also in areas like Indonesia, China, Japan and India. For FY2014, the group reported a revenue of S$77.9 million however the business environment was as their Chairman stated – challenging which led to a net loss of S$6.8 million to shareholders in the same year. Although the F&B industry is a very competitive industry, the group mentioned that they have “initiated various measures to improve their operational efficiency and productivity to maintain market competitiveness”.

Some follow up questions could include stuff like “What were some of these initiative?” and even explore if the tough business conditions were an industry-wide issue or just a company specific issue and if so, why?

 

Swensens

 

2. ABR Holdings Limited (SGX:533)

That’s right, ABR was the operator for the Swensen’s chain of restaurants in Singapore, Malaysia, Brunei and the People;s Republic of China. ABR began as the owner and operator of the first full service Swensen’s ice cream restaurant in Singapore all the way back in 1979! However ABR is not just a one restaurant operator. Other than Swensen, they also have a portfolio of well-known F&B companies and brands like:

  1. Season Confectionary & Bakery
  2. Season’s Café
  3. Gloria Jean’s Coffee
  4. Hippopotamus Restaurant Grill
  5. Yogen Früz
  6. Tip Top Curry Puffs and
  7. Oishi Japanese Pizza

The segment that ABR concentrates in could be broadly defined as the casual and affordable dining segment which might have contributed towards a rise in both their revenue and net income to shareholders for FY2013.

An interesting question between the financial results of the two entities would undoubtedly be “why the vast difference in results?”. First we have to understand that they might be concentrating on a different target audience, secondly without delving into their operations in detail it would be inappropriate for us to conclude if the significant difference in profitability between the two companies was either due to operations or just because of one-off events.

On the other hand, a one-off type of event would be ABR’s divestment of Emirada Trading Pte Ltd in 2012 which provided ABR with a huge one off sale. However even after accounting for this divestment, ABR still had close to a 200% improvement of net profit to shareholders in FY2013! And oh, did we forget to mention that ABR paid out a special dividend of S$60.3 million to reward shareholders for the divestment!

 

delifrance

 

3. Auric Pacific Group Limited (SGX:A23)

And the last mention of today goes to Auric Pacific with few operating segments including:

  1. Wholesale and distribution (FY2013 Revenue of S$217 million)
  2. Manufacturing (FY2013 Revenue of S$43.1 million
  3. Food Retail (FY2013 Revenue of S$71.7 million)
  4. Food Court (FY2013 Revenue of S$64.5 million)

Since we are on the topic of the food retail business, we will highlight some of Auric Pacific’s F&B retail operations.

Other than operating and managing Délifrance outlets in Singapore, Malaysia and Hong Kong, Auric Pacific also manage and operate casual dining restaurants and outlets such as 1 Market, MEDZS, Eggs & Berries, Toast@Work in Singapore.

An interesting point to note is that as at March 2014, Stephen Riady of the Lippo Group had a 71.16% deemed interest in Auric Pacific.

 

Value In Action

The next time after having your meal, remember to take a look around and observe your surroundings. This part of on-the-ground research could potentially go a long way in helping in your overall investment decision of a food retailer!

Stay tuned as we explore some things to look out for when doing the due diligence for certain food retailers!

 

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We will only provide you with information relevant to value investing. You can unsubscribe at any time. Your contact details will be safeguarded.The information provided is for general information purposes only and is not intended to be any investment or financial advice.

All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.

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