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NEO GROUP (BUJ.SI)
(14 June 2017) close: S$ 0. 67
Mean Target price: S$ 0. 68
1.) Sector: Catering company
2.) Business Segments:
(a) Food catering business
(b) Food retail business
(c) Food and catering supplies business
(d) Food manufacturing
(e) Food trading
(f) Other businesses (Other businesses segment involved in the design, marketing and distribution of floral arrangements, gifts and hampers and manufacturing of bread, cakes and confectionery.)
3.) Countries that the business operates: 29 countries
4.) Challenges: Given its high gearing ratio, there are little room for the business to grow through acquisition.
Demand for food catering last year was sluggish due to the absence of SG50 celebrations. Cai expects industry growth to remain tepid this year given the lacklustre consumer sentiment.
5.) Strengths: Food Manufacturing segment turns operationally profitable, result of effective turnaround strategies. Recent acquisition of U-Market, which owns and manufactures popular “Joo Chiat Kim Choo” rice dumplings brand, to strengthen Neo Group’s vertically-integrated value chain.
On the core Food Catering business segment, Neo Group recently established a 51%- owned subsidiary, Gourmetz Pte. Ltd. (“Gourmetz”), which targets the burgeoning elderly-care and childcare market segments. The Group also continues to pursue corporate clients and venue partnerships to build sustainable income streams.
7.) Alp Conclusion: The group fundamentals are rather strong, but due to recent aggressive expansion, it saw a huge rise in debt. Depending on how quickly the Group is able to successfully integrate its new acquisitions, the Group’s operations are expected to remain profitable next year.
On the core Food Catering business segment, Neo Group recently established a 51%- owned subsidiary, Gourmetz Pte. Ltd. (“Gourmetz”), which targets the burgeoning elderly-care and childcare market segments. The Group also continues to pursue corporate clients and venue partnerships to build sustainable income streams. This might help them to deepen their market penetration and capture greater market share.
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