Breadtalk

This stock is one of the potential to grow further in the future.

A growth stock to boot. Recently all its segments have shown growth, according to the directors' report.

i have seen the store in bali & maakasaar (indon) , shanghai operating all with long queues

Believe is an undervalued stock in terms of future growth potential... maybe one day Spore's own 'Macdonald' or Subway?

Where eagles dare... a Buy & Hold... at own risks.

their latest Q4 and FY10 profit is largely supported by 4.1mio gain from sale of property in shanghai. if you remove this item, their results look pretty bad. NPAT will probably be 30% lower than FY09, and net margins will be about 2.5%. inflation is their biggest problem now. if inflation persists and selling prices stagnate, more growth and sales may actually lead to losses.

roe is about 13% but p/b is about 2.5x. which mean returns on your equity is about 5% for FY10.

the business has good marketing and strong sales, but doesn't seem to enjoy good economics. despite their high selling prices, they still can't grow their margins. these reasons makes the current share price over-value the business. i think there's alot of expectation already built into the share price.

so their price is affected by the inflation of commodities product they needed for breadmaking?

my apologies for not making myself clear. i have since edited my post.

what i meant was, that their bottomline and net margins are affected by inflation in cost of ingredients (flour, eggs) and other related-expenses (labour, rent). but because the selling prices of their final product is already at a premium, they may find it quite difficult to raise selling prices to cope with inflating costs and expenses. the market doesn't seem to be bothered by this situation and therefore i'm of the opinion that the business is currently overvalued.

great thorough research karlmarx. im still learning and u definitely taught me plenty from this on looking the whole picture rather than plainly from the numbers!

(25-04-2011, 02:35 PM)Zip113 Wrote: great thorough research karlmarx. im still learning and u definitely taught me plenty from this on looking the whole picture rather than plainly from the numbers!

you are too kind with your words, zip. i've never studied finance or accounting so you'll have to be extra careful with my statements. this forum has plenty of good ideas and i hope you can teach me a thing or two as well!

Only like their pork floss buns, to be honest. I find the rest of their buns very dry!

The Straits Times
Sep 1, 2011
BreadTalk to open an outlet a month

By Melissa Tan

BAKERY chain BreadTalk is opening about one outlet a month in Thailand as part of an ambitious expansion strategy, chairman George Quek said yesterday.

Its rapid expansion should see the chain with 30 to 50 stores in the country within the next three years, and 80 stores by 2016. The stores will include Food Republic, another of the group's brands.

At present, the group has 17 outlets in Thailand, comprising its BreadTalk stores, Toast Box coffee and toast chain and Din Tai Fung dim sum restaurants. The Thai operations are part of the group's wide reach of more than 400 stores in 16 countries across seven brands.

Mr Quek was speaking after the ground-breaking ceremony yesterday for BreadTalk's $64.1 million international headquarters at Paya Lebar iPark near Tai Seng MRT station.

The group said in a statement that the event marked a milestone since the opening of BreadTalk's first office in Hougang Central 11 years ago with just eight staff.

The 10-storey building designed by Singapore architect Tan Kay Ngee should be ready in 18 months and would 'provide the essential support required to accelerate the group's global expansion drive'.

Mr Lee Yi Shyan, Minister of State for Trade and Industry and National Development, said at the ceremony that the headquarters would 'be a production and logistics hub to support not just Singapore's operations but also the company's aggressive globalisation plans'.

He also said the building would 'effectively double BreadTalk's existing capacity for expansion'.

The international headquarters will house BreadTalk's main office and retail, research, training, logistics and central kitchen facilities, while a retail area will showcase and test new concepts.

The central kitchen will make frozen dough and noodles for the group's businesses, which also include Japanese noodle restaurant RamenPlay, The Icing Room and Carl's Jr China.

'BreadTalk buns will taste exactly the same across all outlets when desired, or taste exactly as it is needed for a specific market. In this way, BreadTalk could ensure consistency and quality across all its outlets,' Mr Lee said.

> the business has good marketing and strong sales, but doesn't seem to enjoy good economics. despite their high selling prices, they still can't grow their margins. these reasons makes the current share price over-value the business. i think there's alot of expectation already built into the share price.

During inflationary time, though BT can not charge too high premium for its break/buns products vs its competitors to pass all inflation cost to consumer, as other companies would also increase the price of its bread to pass part of inflation cost BT would be able to also increase its end product price maintaining the price premium difference from its competitors. This would ensure company's margins are maintained in long term.

Its interesting ot observe that from 2004 to 2007 though inflation was increasing at very high rate, company's net profit increase rate was much higher than revenue with very few exception incomes (govt grants etc). This shows that company is able to pass inflationary cost to its consumers easily.

However ironically during 2008/2009 when inflation was very low relative previous years profit growth (excluding significant govt grants) was lower than revenue growth.

(29-09-2011, 10:46 PM)yogi Wrote: Its interesting ot observe that from 2004 to 2007 though inflation was increasing at very high rate, company's net profit increase rate was much higher than revenue with very few exception incomes (govt grants etc). This shows that company is able to pass inflationary cost to its consumers easily.

The ability to pass cost to consumers should be seen with gross margins and not net margins. Net margins would factor in the non-operating costs which may be reduced as the company grows bigger and enjoy economies of scale (financing, administrative expenses etc.)

i believe the increasing of net profit yoy for BT during the years following its IPO was a result of the strength of their marketing strategies plus rapid expansion. you no longer see long queues in their bakeries. i suspect their singapore operations are loss-making given what seems to be less crowds and expensive overheads. most of BT's outlets in singapore operate in premium locations. their profits are shrinking due to increasing overheads and their product hype/novelty wearing off. i believe most of their bakery profits come from china.

this resulted in toastbox being incorporated into BT outlets in singapore to bring the crowds back. the strategy paid off somewhat.

the problem with marketing food as a novelty item, is that tastes change. people eventually tire of eating bread regardless of how unique it is; it is mostly dough, afterall. there was the donut craze. and the bubble tea craze (which is currently recessing for the second time). in the long run, staple food still outlast non-staples; people still don't expect to eat buns for meals

old chang kee while selling non-staple food, survived because it never tried to go upmarket with its product. its retail space is very small, and while it often locates itself at high-traffic area, you will notice it never goes for the best (most expensive) spot in a mall or building. furthermore, its headcount is low, and its products are pre-prepared. this is efficiency.

BT's bakeries will probably be more profitable and sustainable if it operated in non-premium locations. but if it did, it probably wouldn't get the attention it needed to attract investors and franchisees.. their current strategy seems to be creating new retail brands, possibly in hopes of resurrecting the hype it did with its bakery 10 years ago, like ramen play and icing room. again, if you observe the locations it operates in, it is unlikely that they are making (acceptable) profits.

i put BT in the same league as sakae; a shooting star that lasts only as long as it could dazzle the audience. too much resources into marketing and too little into operational efficiency. ivan lee was smart to sell thai express to minor international; he knew his business model couldn't stand the test of time.