One lazy Saturday, I was walking along Orchard Road with my family and felt my stomach growling. Somehow or rather we ended up at the basement of Paragon Shopping Centre.
Paragon Shopping Centre is one of the two properties held under SPH REIT (SGX:SK6U) and is right smack in Singapore’s prime shopping area, however that’s a topic for another day and let’s not digress from our main topic – We were hungry!
Right around the corner we came across Soup Restaurant and without further ado, we started to queue up for it. Being typical Singaporeans, we assumed that if there’s a queue it should be good. Well, we heard good reviews of their popular Samsui Ginger Chicken and variety of herbal soups and didn’t see too much of an issue for waiting a few minutes in line.
Something Caught My Eye
Just when we were next up for a table, something at the counter caught my eye. Right at the counter was an application form for a privilege card. However on closer look, this was a very interesting privilege card!
Known as a S Card, this was a Shareholder Privilege Card Scheme and you have to be a shareholder of at least 2,000 shares of Soup Restaurant Group Ltd (SGX:5KI) to qualify as an applicant. With this S card, the cardholder could enjoy a discount of 15% on the sub-total bill less goods and services tax (“GST”) and service charge while dining at participating outlets in Singapore. Here’s some tangible benefit from being a shareholder!
This Led To Two Interesting Things!
First, prior to that day, I did not know that Soup Restaurant was a listed entity on the Singapore Stock Exchange.
Secondly, this was the first time I saw such a scheme and it was a rather interesting move for shareholders. Shareholders of Soup Restaurant could benefit on a day-to-day basis from this discount in addition to the more conventional stock appreciation and dividends that they can benefit from a financial sense. This was also an interesting way to attract customers!
Some History Of Soup Restaurant
Although Soup Restaurant Group Ltd was only listed in May 2007, Soup Restaurant Pte Ltd was incorporated since 1991 when their first outlet in Smith Street was established. As reported in their 2013 Annual Report, the Group had a total of 22 restaurant outlets in Singapore, Malaysia and Indonesia.
Did you know Soup Restaurant was inspired when the founders notices a surge in the popularity of Herbal Soups in Hong Kong!
Another interesting fact was that their Managing Director and 3 of their Executive Directors had an engineering background!
So How Do Their Financials Look Like?
At the moment, most F&B retailers situated in Singapore are faced with some headwinds especially from the manpower front and Soup Restaurant is no stranger to this as well. Even in these conditions, Soup Restaurant still managed to increase Revenue year on year by 7.8% for FY2013 to S$38 million. However, revenue is just one part of the equation and some might ask about the more crucial bottom line.
Soup Restaurant also improved their continuing operations by a whooping 25.9% for a Profit before Tax (PBT) of S$0.8mil for FY2013. This translated to a FY2013 PBT margin of 2%, meaning to say that for every $100 of sales, they earned $2 (From a profit before tax level) . So is this good or bad?
For margins, we can only tell if we have a good peer group to compare them with, we cant tell if its good or bad on its own. A good start would be the other listed F&B players in Singapore. Another way to compare margins would also be against Soup Restaurant’s historical performance if the business hasn’t changed too drastically!
Another thing that we have to pay attention to was the drastic drop in Soup Restaurant’s year on year net income from S$4.3 million in FY2012 to S$0.5 for FY2013. This was primarily due to sale of their assets which was a one-time event! In Fy2012, Soup Restaurant recorded a net gain of S$3.4 million from the disposal of its entire equity interest in the share capital of Y.E.S F&B Group Pte Ltd in Aug 2012. Shareholders were rewarded with a special dividend of S$2.4 million for this particular divestment!
Value In Action
Finding out where a queue forms consistently is a good starting point to search for investments. However once that is settled, we have to delve down to the financials to see if the company is really making money or if they only look like they are making money!
Comparisons with their peers are a good start for comparison. When in doubt, always look to the market leader as the benchmark. If the company is outperforming their market leader significantly, find out why!
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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.