Breadtalk

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OSK-DMG initiates coverage of BreadTalk with a $2.00 target price

Analysts: James Koh & Juliana Cai


BreadTalk, the most successful F&B retailer in Singapore, has its ubiquitous brands found in every corner of the island. It also owns one of the largest bakery chains in China, with a footprint in 57 cities. Over the last decade, the company has built up scale and we believe it is now on the cusp of reaping this advantage to achieve profit growth. We initiate coverage on this under-researched company with a BUY, with our SGD2.00 TP implying a 50% upside.


♦ Multiple dough for growth. BreadTalk Group (BreadTalk) operates a multi-format food and beverage (F&B) business, which has created various avenues of growth for the company. In our view, most of its brands are well-known and are market leaders in their respective categories. For example, the company’s new JV with Minor International (MINT TB, BUY, TP: THB40.00) would be a key driver for its expansion in Thailand, especially for its Din Tai Fung franchise.

♦ Regional footprint appeals to potential acquirers. BreadTalk has more than 850 outlets under its umbrella. This includes more than 400 outlets in China, where it has presence in 57 cities. We believe this network is difficult to replicate and holds substantial appeal for potential acquirers. Minor International’s 11% investment in the company is a testament to that – and any further corporate action would be a bonus for BreadTalk shareholders.

♦ Substantial upside for margin improvements. Since listing in 2003, it has grown its number of outlets at an unprecedented pace to 850 from 28 in 11 years. We believe capex expenses and start-up costs have weighed down on profitability and a moderation of these expenses, as well as greater business scale in China, would present substantial upside for its net margin to improve from 2.5% currently.

♦ Time to roll in the dough, initiate with BUY. Our SGD2.00 TP is based on a 7.5x FY15F EV/ EBITDA, a methodology we believe better reflects underlying cash earnings. Even then, this is almost a 50% discount to regional peers which are trading at an average of a 14.4x EV/EBITDA. Our SOP cross-check, which leans heavily on the replacement cost for its retail network, derives a value of SGD1.76/share.
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just go eat DTF SG...can see that they are shorthanded and staff service bad...
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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Nett profit is 1.6%. Annual net profit approx. $8M divide 850 outlets = $11K per outlet.
No, Thank you, OSK-DMG.
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ROA is only 3.01% while ROE is 13.35%. And ROIC had dropped to a new low since its IPO listing. Financial leverage is also at its highest since listing.

A walking time bomb..
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I can't for the world figure out what's so special about Breadtalk's bread. They are not very creative in introducing new bread offerings. There are so many other bread & pastry outlets in Singapore with better product offerings. I can't quite figure out how they manage to expand so fast. Don't the Chinese have quality bakeries of their own? Am sure Breadtalk will not survive in Europe.
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(14-11-2014, 02:30 PM)riverfish Wrote: I can't for the world figure out what's so special about Breadtalk's bread. They are not very creative in introducing new bread offerings. There are so many other bread & pastry outlets in Singapore with better product offerings. I can't quite figure out how they manage to expand so fast. Don't the Chinese have quality bakeries of their own? Am sure Breadtalk will not survive in Europe.

Breadtalk also copied from Taiwanese bakery model. Was creative when it first started out. Now neighborhood shops also can copy.






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"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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Hmm, sometimes a ridiculous share price is followed by share placement, there is no shortage of brokerages that will do it for a small fee
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Minor International had resumed buying shares from the open market..

http://infopub.sgx.com/FileOpen/_Primacy...eID=327666
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Stock price moved up to $1.46 this morning probably on the news. Looks like punters are playing up the stock. Will it surpass it's last high of $1.49? Probably not unless Minor International increases it's stake further.

(Not vested)
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Hear Me Out: Episode 3


George Quek, Entrepreneur and Community Leader: In the third episode of Hear Me Out, George Quek, the man behind local food business group BreadTalk, shares with hosts Bryan Wong and Lim Peifen on how he built his food business from scratch. In recent years, he has also been actively involved in public service work.

http://xin.msn.com/en-sg/video/catchup/hear-me-out-episode-3/vp-fa6cac19-37fd-461b-b684-0937302cbe1f
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