Food Junction

[Drizzt]

dydx i beg to differ. the main problem is operating lease cost. i dunno why breadtalk is able to navigate well in this blood sucking REIT rentail space while FJ had struggled. had it not been for this they would have been donig much better.

[tanjm]

I held this for 2-3 years before I cut loss. I agree with another poster, they show no evidence of good use of capital.

[dydx]

For the food court business in Singapore, operators like BreadTalk and Food Junction are subject to the same risks - the key being merciless Reit-landlords trying hard to squeeze them for higher-and-higher rentals. With so many F&B outlets in most malls, competition is tough, even though most food courts remain well patronized during meal times, mainly because of their lower selling prices. However, it doesn't necessarily mean that all food courts are profitable - e.g. I will be very surprised if the expensive Food Opera (operated by BreadTalk) food court at the basement of Ion Orchard is able to make consistent profits at all! I guess this may be the main reason why Food Junction has chosen to have its new food courts at (a) NEX@Serangoon mall but on the 4th floor (lower rental), vs. BreadTalk opening Food Republic/Toast Box/Toast Box at the basement; and (b) Central@Orchard and NUS Yusof Ishak House, where both landlords are non-Reit.

We can simply take a look at the Q1-FY11 results of both BreadTalk and Food Junction to compare their relative profitability.....
http://info.sgx.com/webcoranncatth.nsf/V...F002F4443/$file/BTG_1Q2011_Results_Announcement.pdf?openelement [Breadtalk]
http://info.sgx.com/webcoranncatth.nsf/V...penelement [Food Junction]

My summary comparison -
BreadTalk - Latest market cap.: $170.2m (281.31m shares@$0.605); against revenue: $83.2m (majority from sales of Din Tai Fung restaurants, BreadTalk bakery/Toast Box coffee shop outlets), PBT: $1.9m, NP: $1.22m, NAV/share: $0.247; and FY10's dividend: $0.01/share. BreadTalk's share price has been trending downwards steadily from high of $0.72 recorded on 24Jan11.

Food Junction - Latest market cap.: $26.75m (127.39m shares@$0.21); against revenue: $13.27m (majority fees from food court operations), PBT: $1.17m, NP: $0.86m; NAV/share: $0.249; and FY10's 2 dividends: total $0.5/share. Since Jan11, Food Junction's share price has been well supported (partly by the company's buying back shares) within the $0.20 - $0.22 range since Jan11, with recent signs of increased activities.

Quite obviously, one counter appears over-priced, and the other grossly under-priced...

[Nick]

Food Junction EPS and (PBT margin)

FY 2006: 5.32 cents (19.7%)
FY 2007: 4.29 cents (15.1%)
FY 2008: 2.74 cents (9.0%)
FY 2009: 2.51 cents (8.1%) *Using Jan - Dec figure
FY 2010: 2.04 cents (7.0%)

(Source: AR 2010)

Breadtalk EPS and (PBT margin)

FY 2006: 1.44 cents (5.2%)
FY 2007: 2.69 cents (7.2%)
FY 2008: 2.76 cents (5.7%)
FY 2009: 3.95 cents (6.3%)
FY 2010: 4.01 cents (5.5%)

(Source: AR 2010)

Is it fair to expect both companies to trade at similar valuations ? The growth (and decline) in profitability are at polar opposites for both companies based on the historical data. I think Drizzt brings up a valid question - what did BT do to negate the impact of rising rental rates which keeps its PBT margins relatively stable ? How can FJ improve in this aspect ?

Pls note that I am not saying one company is superior to the other. Just curious on the point on managing rental expenses. And how this may be a determining factor in F&B company operations going forward if anyone seeks to invest in this sector. And kindly point out any error in the data.

(Not Vested in any F&B company)

[pianist]

may i know where it its food court location in beijing? is it the one along 王府井 步行道?

[pianist]

the recent flood damage to tanglin mall..i wonder if it adversely impacted food junction's Tetsu Japanese Restaurant located on the 3rd level of the same mall.

[dydx]

the recent flood damage to tanglin mall..i wonder if it adversely impacted food junction's Tetsu Japanese Restaurant located on the 3rd level of the same mall.

I guess the owner of Tanglin Mall will have to seriously consider giving some compensation to all the tenants which have been affected by the last Sunday morning's flash flood.

[d.o.g.]

I guess the owner of Tanglin Mall will have to seriously consider giving some compensation to all the tenants which have been affected by the last Sunday morning's flash flood.

Tanglin Mall is strata-titled. So each tenant will have to deal with their specific landlord, or if they are the owner-occupant, they will have to deal with their insurer.

[momoeagle]

To me, a large F&B company does not necessary have to make money from all of it's branches. Some branches make, some don't, but the branches that are in the prominent locations (which usually do not make money) help to promote brand awareness. In a way, it's a form of advertising.

[dydx]

Tanglin Mall is strata-titled. So each tenant will have to deal with their specific landlord, or if they are the owner-occupant, they will have to deal with their insurer.

I have checked, and the Tanglin Mall, together with the adjoining Traders Hotel, is actually owned by Cuscaden Properties P/L, a 55.4%/40.75% j-v company of Allgreen Properties Ltd and Shangri-La Asia Ltd - 2 listed units of the Kuok Group.

I suppose ultimately the Kuok Group management will have to treat the affected tenants in Tanglin Mall fairly for the sake of keeping good long-term business relationships with them and Kuok Group's good reputation.