Japan Foods Holding Ltd

[RBM]

Disappointing FY results. Almost S$ 8 Mln loss, no Dividend and firm indications that Management is struggling to keep costs under control. I suggest rationalisation of outlets (and Brands) must be materially more ruthless than the mere tinkering we have seen hitherto. Thankfully JFH remains debt free but I have to wonder if Management has the mindset to make the difficult decisions… and follow thru.

Vested

[weijian]

Hi RBM,

I think Japan Foods is facing head winds on both its topline and bottom line. First on topline, mass market Jap restaurants faces strong competition from Don Don Donki's very value-for-quality offerings. Anecdotally, even since I tried Don Don Donki's ready to eat food, I have not stepped into a Jap restaurant. There is slightly more than 10 Don Don Donkis throughout Singapore and they are located mostly at shopping malls, geographically very similar to many mass market Jap restaurants as well. As for bottomline, the entry of many PRC food concepts is bringing a lot of "rental support" for landlords. As such, there may be a propensity for the mall owners to up their rent than keep it constant. If many of these PRC food concepts are backed by strong sponsors back in Mainland China, it is a no brainer who can last longer. For example, if the parent has a few thousand outlets in China, 5 outlets in Spore losing money is probably peanuts.

[RBM]

Hello again Weijian, Appreciate your post. Can’t disagree with its contents. But my concern with JFH’s Management is how much of JFH’s problems are of their own making. I challenge how much Management focus is directed towards rationalisation, cost cutting and prioritisation rather than rolling out new brands and expanding. Proof-Point: Today I read of yet another new JFH brand being rolled out at Woodleigh Mall, to much fanfare. Thats not what JFH and its Shareholders need right now. Its time for cutting costs & consolidating. The current focus is misplaced IMO.

Vested. Best to you Weijian.