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ALP STOCK INVESTMENT CLUB
Company: BreadTalk Group Ltd (Code: 5DA.SI)
Closing price at 30 May 2015: $1.40
12-Ms target Price: $1.50
1. Sector: Consumer Staples (F&B Industry)
2. Core Business Structure:Subsidiaries: Din Tai Fung, Food Republic, Toast Box, Ramen Play, The Icing Room, Carl’s Jr., J.CO. Donuts & Coffee
3. Segment that generates highest revenue: Revenue from sale of Bread make up 50% , restaurant operation make up 22.2%while food court operations make up 27.8%.
4.Countries that the business operates in: Singapore, Malaysia, China, Hong Kong, Indonesia, Thailand, Philippines, Vietnam, Sri Lanka, Oman, Kuwait, Saudi Arabia, Jordan, Bahrain, India and Cambodia.
5. Challenges: It is difficult for Breadtalk to branch out more deeply into other countries especially China(7.4% lowest In 20 years) due to the slow economic growth faced by the country which impacted general consumer sentiment as a whole. Hong Kong and Thailand were also faced with political issues making it difficult for Breadtalk to have a steady growth in these two countries.
BreadTalk also had to overcome rising labour and rental cost while facing intense competition as there is an ever growing number of new entrants for this industry.
6. Strengths: Has numerous investments in land and properties to hedge against inflation and rising rental cost. They have also converted some land into commercial buildings for their own use and also generate some rental income. Some investments in properties BreadTalk has in Singapore are Chijmes, TripleOne Somerset and 112 Katong.
They have a clear goal which is to penetrate deeper into foreign markets especially China and they have the financial capability to do so. Their reputation will definitely grow bigger along the way and would be better well known in China.
7. Significant events: BreadTalk launched LKY Bun to commemorate Mr. Lee Kuan Yew but was criticised by the public. The public felt that BreadTalk launched the Bun as a marketing ploy to earn money although BreadTalk had donated the proceeds of the sale of LKY Bun to Community Chest. Some felt offended that BreadTalk linked Mr. Lee Kuan Yew to a Bun which was not respectful.
8.) GTI Ranking: 122
10. Recommendations: HOLD. BreadTalk is still a growing company and has not reached its fullest potential yet. The stock may outperform in the future. However, we think that its bakery segment which is the biggest driver of revenue, has limited upside potential as the local bakery industry is saturated with competitors that can imitate original innovations of BreadTalk quickly. For BreadTalk to outperform in the future, it is crucial for them to diversify into other new products lines such as signing more franchises.
COMPILED BY: Eng Jian
DISCLAMER: Readers should not rely solely on information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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