BREADTALK GROUP LIMITED
5DA.SI
Still experiencing headwinds in China
2Q15 results met ~23% of FY15F
Closed two food atria in Mainland China
Valuations still unattractive
2Q15 results in-line
- BreadTalk’s 2Q15 results came in within expectations.
- Driven by growth in sales for all segments (Bakery, Food Atrium, Restaurant), revenue was up 10.7% YoY to S$154.9m, making 23.5% of our FY15F and PATMI was 10% higher at S$2.9m, constituting 23.1% of our full year estimate.
- There were one-time write offs of ~S$2m from closure of non-performing outlets in this quarter and 2Q14. If we strip these out, estimated PATMI growth would have been lower.
- We note that rental expenses rose 31.1% to S$37.3m, and labour costs continued to increase by 8.8% to S$40.6m.
- Notably, margins managed to maintain a largely similar picture, with gross profit margin a tad lower by 0.2ppt to 52.7%, EBITDA margin up 0.1ppt to 11.6% and EBIT margin up 0.2ppt at 3.4%.
- An interim dividend of 0.5 S-cents was also declared, consistent with last year’s.
China remains the weak spot
- The group’s Food Atrium division’s revenue grew 7.3% YoY on the back of same store sales performance at their Hong Kong outlets, as well as improvements in revenue for their Taiwan and Thailand operations.
- However, management cited the slowdown in China translating to persistent operating challenges, such as weaker footfalls in the shopping malls where they operate.
- Two outlets were closed in China and a resulting one-time write off led to a 24.3% decline for 1H15 EBITDA with EBITDA margin at 11.7% vs. 1H14: 16.7%.
- Under Bakery, management also stated plans to improve under-performers from its Toast Box concept in China.
Restaurant segment boosted by ramp up in Thailand
- Revenue for the restaurant segment rose 10.6%, underpinned by consistent performance of their Din Tai Fung (DTF) operations in Singapore, as well as increased revenue contribution by two DTF outlets in Thailand.
- We note that the latter would be the growth driver, given that the group is able to only operate DTF in Singapore and Thailand.
Estimates and rating unchanged
- We think valuations are still unattractive as the stock is currently trading at 27.5x FY15/16F PER, thus we are keeping our SELL rating with a fair value estimate of S$1.14.
Jodie Foo | http://www.ocbcresearch.com/ OCBC Investment Research 2015-08-07
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