Katrina Group - CIMB Research 2016-10-13: Specialising in multi-cuisine concepts

Katrina Group - CIMB Research 2016-10-13: Specialising in multi-cuisine concepts KATRINA GROUP LTD. 1A0.SI

Katrina Group - Specialising in multi-cuisine concepts

  • Katrina operates chains of restaurants and cafes in Singapore and Beijing, China.
  • Katrina reported 15% yoy growth in 1HFY16 revenue but a 34% yoy drop in net profit post-IPO in Jul 2016.
  • Management expects to remain profitable in the next 12 months.
  • According to its IPO prospectus, Katrina intends to pay out 60% of its net profit as dividends in FY16F.



Something for everyone 

  • On 12 Oct 2016, we visited Katrina Group Ltd (“Katrina”), an operator of restaurants and cafes. Katrina owns and operates restaurants under nine different F&B brands. Each brand provides different dining options to cater to a wide spectrum of patrons and different market segments. Its restaurants are located in Singapore (32) and Beijing (2), China. 
  • Katrina has also launched its own customised online food ordering and delivery system.


15% sales growth in 1H16 

  • Post-IPO, Katrina reported that 1HFY16 revenue rose 15% yoy but that net profit fell 34% yoy. Katrina attributed the growth in revenue to contributions from five new outlets opened in 2H15. 
  • Sales and distribution costs also rose due to marketing and promotional expenses to create awareness of the launch of its online ordering service.
  • There was also a one-off IPO expense of US$0.4m.


Outlook 

  • Management highlighted that the F&B industry has always been highly competitive as entry barriers are comparatively low. The group’s strategy is to continue opening and operating new restaurants under its various proprietary brands, including halal-certified brands. 
  • The group is also on target to expand its online food ordering and delivery services to more of its brands. 
  • Barring any unforeseen circumstances, management expects to remain profitable in the next 12 months.


Balance sheet and dividend policy 

  • Katrina was in a net cash position in FY13-15, as well as in 1HFY16. According to its IPO prospectus, Katrina intends to recommend and distribute dividends comprising at least 60% of its annual net profit attributable to shareholders of the company in FY16F.
  • Katrina highlighted that its intended dividend payout will be subject to its financial performance and growth opportunities.


Valuation 

  • Based on Bloomberg consensus forecasts, Katrina is trading at CY16F P/E of 13.8x and P/BV of 4.5x. Katrina’s CY16F dividend yield is 3.1%. 
  • Based on Bloomberg consensus, Jumbo Group which also operates restaurants in Singapore and China is trading at CY16F P/E of 21.7x and P/BV of 7.2x. Jumbo’s CY16F dividend yield is 2.4%.
  • Bloomberg consensus estimates put Katrina’s CY16F ROE at 23.5% and Jumbo’s at 28.3%.


NOT RATED
Target Price: N/A



William TNG CFA CIMB Research | http://research.itradecimb.com/ 2016-10-13
CIMB Research SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998



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