Sunday, June 16, 2013

Company in focus - Breadtalk

I would like to start a series of analysis on individual companies. The recent stock market correction presents an opportunity for us to buy fundamentally strong companies at cheaper prices. My analysis on the companies will focus on the business aspect of the company and how it is run.

Today, i'll start of this first session with a company named breadtalk. This is a company that i find has been successful and has the potential to expand itself more. The man who started this business is George Quek Meng Tong. He's also the chairman of the board of directors at breaktalk group currently. Breadtalk started as a small pastry shop selling bread with pork floss as a filling. An example of it is shown below.

Many of us in Singapore are familiar with the breadtalk brand and have seen its bakery shop every where in Singapore. But they do not just have the breadtalk bakeries. They also have other flagship stores under their group. Other names include toast box, the icing room, Ramen play, Din Tai Feng, Food Republic and Carls Junior in China.

Now, some statistics on their business and operations:

Business operations spread across 15 countries in Aisa and the middle east.
609 Bakeries worldwide
47 Food Atrium
30 Restaurants

Breakdown of profits:
52.1% from bakeries
22.9% from restaurants
25% from food atrium

Net profit has been increasing steadily the past 4 years
2009: 11.1 Million
2010: 11.3 Million
2011: 11.6 Million
2012: 12 Million

Some financial ratios:
PE: 20.4x
ROE: 15.89%
EPS: $0.04

The profit margin for breadtalk is relatively small mainly due to the high rental cost they incur from their premises. This stock i would think of it as a growth stock as the dividend yield is only around 2% last year. It is trading at a stock price of 0.89 as of friday's close. The stock price has gone up from 0.33 in 2008 to where it is now. That's almost 3 times of its price in 5 years. However, their PER is relatively high. Unless they can really increase their profits, this stock is quite overvalued.

I forgot to mention that recently, they have bought over a traditional pastry shop called Thye Moh Chan.
This shop sells traditional Chinese pastries as shown below.

I would think that if breadtalk continues its expansion, its potential is endless. Recently, they have moved to its new HQ at upper paya lebar road. There they have a R&D centre and it also house their central kitchen, automatic manufacturing line, offices, breadtalk bakeries and restaurants. It shows me how serious they are with their business and they will definitely have more business and will become even bigger in the future. I would wait for a lower price to buy the shares of this company and ride on their growth internationally.

No comments:

Post a Comment