Japan Foods Holding Ltd

[MrMsus]

The greatest concern relating JFH is its ability to maintain its past track record. It has one of the highest, if not the highest, ROA and ROE compared to its closest peers in the SG F&B sector (i.e. Soup restaurant, Sakae, Breadtalk). Not to mention its clean balance sheet with zero borrowing and its still positive FCF (4 year streak since 2012).

Now, the problem is that JFH's revenue has very likely plateaued. Growth in the top line has almost come to a halt since 2012, yet its selling and distribution expenses as % of sales kept rising (i.e. ~70% in 2015 vs ~60% in 2014). But they've managed keep their bottom line afloat, because their COGS as % of sales has been on a very consistent decline since 2009. Management attributed this to streamlining their in-house operations, building a factory in Singapore and making their own noodles instead of importing them from Japan. In the latest AGM board director Eugene promised they would never compromise quality for profit.

But this begs the question: So what if JFH hadn't been able to keep its COGS low all these years? Just how long and how much can JFH continue to lower its COGS? I doubt they can keep it up. This will ultimately hit their bottom line, if revenue doesn't expand, or if S&D expenses continue to rise. The outcome on the latter is quite obvious - I don't think rental or labour costs are going to fall anytime soon. At least not in land-scarce and labour-tight Singapore.

As for the former, I don't see how JFH can continue to expand and open more stores (even if they're new brands) without cannibalising their own sales elsewhere. I might be wrong. This is where it'll be interesting to see how things will pan out.

Otherwise, the time is probably ripe for ROA and ROE to start declining as net income falls. Even if their overseas JVs and sub-franchisee businesses take off I doubt that would have much significance for JFH because their contribution is so puny. After all, JFH earns only the raw materials and franchise license fees from their sub-franchisees, and about 25% of their associates profits (which amounted to about $546,000 in 2015). To put things in perspective, $546,000 is about 11% of net profit. Not too shabby, but this is not likely to make up for the decline from its main SG business.

I take cue from Pat Dorsey's Five Rules for Successful Stock Investing: "Restaurants in the slow-growth stage typically have strong FCFs, solid returns on capital, and usually start to pay out a dividend because they're running out of investment opportunities in the business. Few restaurants reach the slow-growth stage - most just go straight into decline. To be a successful slow-growth restaurant chain, the concept has to be ingrained in consumers. In the US, Macdonald's Wendy's, and Red Lobster have long passed the stage where their stores were destinations or chic places to visit. However, consumers know what to expect before they walk into the stores or cruise into the drive-thru. It's up to the restaurants to maintain that familiarity with consistent advertising and service. Failure to provide the quality of food or service that people expect can bring slow-growth firms into the realm of decline."

So JFH today fits into the slow-growth category. Whether it can continue to be a successful one depends a lot on its strategy going forward to gain customers loyalty. I'd rather they retain their old customers, than try something entirely new to attract new patrons but risk losing their old customers.

[CityFarmer]

Japan Food is in my monitoring list. I really doubt that JFH is already in "slow-growth" phase of biz cycle. The slowing down, is similar as other stocks I am monitoring, is mainly due to recent market challenges. The issues of rental, manpower shortage and manpower cost are the real challenges of F&B sector.

Once solutions found to tackle the issues, I reckon, JFH will resume the growth. I am yet to look into the latest report, and will post more once review completed.

(not vested, but monitoring. I agree the company worth the attention)

[CY09]

Here is my opinion on JFH and why there was an improvement in top and bottom line in the past few years.

One of its success is in its Menya Musashi Ramen, it was a roaring success for JFH because it is one of the best ramen chain I have tried here. This may explain the growth of Menya stalls from 0 in 2012 to currently 8 as of 2015. This too coincided in the rise of "ramen" trend among Singaporeans. However, the ramen space is now getting crowded as stand alone stalls are increasing in numbers. However in terms of ramen chains with presence in shoppjing malls, JFH is one of the best, Breadtalk's ramenplay lost out in this area.

If JFH is to continue growing, the mgmt has to decipher the tastebuds of the Singapore's market. This is one risk of JFH, whose exposure is 100% Singapore unlike breadtalk. For the food industry, it is realy important for the mgmt to know the flavour of the season and act on it through good food and brilliant marketing. Breadtalk succeeded because DTF caught the dim sum craze, JFH the "ramen craze", llao llao (dont know whose company it is under) caught the yogurt craze.

JFH's osaka "dumpling" chain seems to have a small success but i don't know how well it is going. Lastly, I do not think breadtalk and JFH will venture into the high end food market but instead concentrate on the entry level restaurant segment of Singapore consumers. This is because there is a giant called "Les Amis group" whose target is mainly the high end segment of Singapore and has restaurants serving various cuisines. So for the "2" to expand there will be a challenge and expensive to fight the incumbent who has been there for at least 10 years.

[cyclone]

Ajisen ramen yummy yummmy.

Full Year Financial Statement And Dividend Announcement for the year ended 31 March 2016 :
http://infopub.sgx.com/FileOpen/2016.05....eID=406933

Some highlights :
1. The Group's revenue increased 0.2% to S$62.8 million in FY2016.
2. The Group's net profit attributable to equity holders of the Company decreased 20.3% to S$3.8 million in FY2016.
3. In FY2016, Japan Foods launched three new brands : New ManLee Bak Kut Teh, Ginza Kushi Katsu, Dutch Baby Café.
4. NAV per share as at 31 March 2016 was 17.74 Singapore cents.
5. The Group declared final dividend of 1.25 Singapore cents per share.
6. As at 31 March 2016, Japan Foods had 15 Ajisen Ramen restaurants, compared with 17 restaurants at 31 March 2015.

<not vested>

[thor666]

Jfh q3 results out.

* post to be updated after review

http://infopub.sgx.com/Apps?A=COW_CorpAn...8005bdcd81

Sent from my LG-H818 using Tapatalk

[cyclone]

Financial Results for the Financial Year ended 31 March 2017 ("FY2017")

Highlights :
1. FY2017 revenue hits record high driven by performance of new brands
2. The stellar performance was driven mainly by its three newest brands, namely "New ManLee Bak Kut Teh", "Dutch Baby Cafe" and “Ginza Kushi-Katsu” brands.
3. Net profit attributable to equity holders of the company surges 23.3% to S$4.7 million
4. Basic earnings per share ("EPS") for FY2017 was 2.68 Singapore cents versus 2.17 Singapore cents for FY2016
5. Net Asset Value ("NAV") per share as at 31 March 2017 was 18.29 Singapore cents
6. Proposes a final dividend of 1.25 Singapore cents per ordinary share
7. Together with the interim dividend of 0.75 Singapore cents, brings total dividend declared in FY2017 to 2.00 Singapore cents.
8. Announces intention to raise the Group’s target dividend payout ratio to at least 50% net profits attributable to shareholders annually.

More details in :
1. http://infopub.sgx.com/Apps?A=COW_CorpAn...esults.pdf
2. http://infopub.sgx.com/Apps?A=COW_CorpAn...tation.pdf
3. http://infopub.sgx.com/FileOpen/2017.05....eID=455411

[karlmarx]

Latest quarterly shows growth may have plateaued, as suggested by MrMsus in August 2015:

http://infopub.sgx.com/FileOpen/2017.08....eID=465075

The challenges facing f&b operators is mainly labour and partly competition.

Local workers are difficult to hire, mainly because they do not wish to be customer-facing. When hired, they are difficult to manage; will go awol from time to time. Wages has been on the rise but probably still not enough for these issues to be solves, or for them to be motivated. Hence, productivity remains low. Foreign workers are now difficult to hire with stricter quotas. You either pay more for them or you hire less reliable locals. The business either suffers from lower productivity or higher cost. This struggle of running daily operations makes management think twice about expanding. This is probably why JFH is no longer expanding locally; or at least not with its flagship Ajisen. One way to solve this is to simplify the work process for workers, such that the work to be done is deemed not-so-stressful for the wages they are paid. The fast food chains, especially macs, have done this very well.

Consumers expect their favourite makan places to remain consistent in their food standards. This is a challenge if you have high staff turnover and your work processes are not straight-forward. Over time, managers get so worn out with training new staff while running operations, they shudder at the thought of expanding, and training even more new staff. The alternative is to keep the operation team small but able to perform multiple tasks. This is why most of the popular local eateries are run by families (who are thus committed, no need to worry about awol or going back to home country) and do not expand more than their family can handle; Punggol Nasi Lemak, Loo's Kitchen (at Tiong Bahru), Beach Road Prawn Mee, and many others you know of. Too many to name. Ajisen/MM is a chain restaurant that is mostly managed by hired staff. Do you think that these managers are motivated enough to maintain operational effectiveness, while training a team that has a high turnover?

Aside from consistency, consumers also expect novelty, from time to time. Strangely though, they only expect this from the bigger brands and not the 1 outlet eateries. Macs has been able to do this consistently over many decades here. It has the 'good ol favourites' (mc chicken no change for 30 years?) and new items every now and then. Breadtalk focuses much on product innovation too, which I believe is part of the reason for its customers to keep returning. What about Ajisen and MM? Have they introduced new products to their menu lately? If so, have they been able to market it successfully?

[karlmarx]

It looks like JFH's principal brand, Ajisen Ramen, has gone 'out of fashion' with consumers, as sales have been falling for the past few years. Fruit Paradise, one of its own developed brands, which looked promising when it was launched, also appears to be going into terminal decline, with the number of stores being reduced over the years.

You can make a lot of money over a short period of time if you have a novel product, but to sustain consumer interest, businesses need to provide value and/or product innovation.

Though it seems, JFH's strength is in innovating brands. The sales growth of Menya Mushashi, and several other new concepts, has been making up for the lost revenue of Ajisen.

Still, JFH looks to be on soft ground. If customers lose interest in Menya Musashi and the other new concepts, perhaps migrating to yet another new concept Japanese restaurant, that could put a lot of pressure on its profits. The latest of which was only barely able to support its dividends.

[¯|_(ツ)_/¯]

8 July 2020 Div and result Japan Foods
https://links.sgx.com/FileOpen/2020.07.0...eID=623010
Div: 0.25cents
xd: 15 Sep 2020
Pay day: 1 Oct 2020

FY result as at 31 Mar 2020
https://links.sgx.com/FileOpen/2020.07.0...eID=623009
Rev $68m up 0.5%
GP  $57m up 0.4%
NP  $ 1m down 70% ($3m)
Div 0.25cents vs 1.1cents (FY19)

While the support extended by the Singapore Government, in particular the Job Support Scheme and rental relief, will provide a cushion to the fall in the Group’s revenue in the short term, the effects of the pandemic will likely continue to dampen the Group’s prospects and curtail growth for the remaining part of the current financial year ending 31 March 2021.

Wear mask and keep your social distance, everyone.

[RBM]

Personally speaking, I believe it is a positive signal that JFH paid a Final Dividend. I wasn’t expecting one, particularly given previous signals to the market regarding 2H performance and the impact of the virus.

This company is, I suspect, one of the more resilient in Singapore’s listed F&B sector, which is borne out by their stated “SGD 20.4 Mln in Cash and zero bank borrowings” in yesterday’s JFH Press Release. I am wondering if this counter could be one of those to react most positively when vaccination needles start going into arms on a bulk scale.

Vested