BREADTALK GROUP LIMITED
5DA.SI
BreadTalk Group: Helped by gain from divestment
- S$8.5m gain from sale of 112 Katong
- Deeper losses from Food Atrium
- Significant increase in overall staff costs
Core profitability still weak
- BreadTalk Group’s 1Q16 core results continued to be dragged by high expenses.
- The group posted a 1.4% YoY increase in revenue to S$154.6m, meeting 24% of our full year forecast.
- PATMI rose 22% to S$2.4m and formed 21% of our full year estimate, but stripping out the gain of S$8.5m from the divestment of 112 Katong, a non-core real estate investment, the bottomline would have conceivably been a loss. This was mainly attributable to a significant increase in overall personnel expenses, which was up 23.1% to S$52.4m.
Food Atrium segment sees deeper losses
- Food Atrium segment’s 1Q16 revenue was marginally down 0.4% to S$41.8m, while EBITDA declined 82% to S$0.9m. Segment profit was down from a loss of S$37k in 1Q15 to S$4.3m.
- Keeping in mind that the group had 2 fewer outlets compared to 1Q15, the group also cited impact from weaker traffic in certain shopping malls in Mainland China.
- In addition, start-up costs from new outlets, write-offs from outlet closures, and higher operating expenses added pressure to profitability.
Better performance from other segments
- Bakery segment’s revenue was down 1.3% to S$75.9m due to some decline in same store sales for BreadTalk outlets in Singapore, Hong Kong and Beijing, as well as a slowdown for franchise outlets in China.
- Nonetheless, EBITDA margin improved from 7.9% in 1Q15 to 8.9% due to better cost control and productivity gains.
- The Restaurant segment continued to be driven by strong SSSG, with revenue up 9.9% to S$36.9m, and EBITDA margin rose from 16.9% in 1Q15 to 17.7%.
Keeping our view unchanged
- The overall number of outlets has also declined from 957 in 4Q15 to 948 this quarter, mainly due to 4 net closures for Bakery and 5 net closures for Food Atrium. We could expect more consolidation amid the group’s efforts towards cost management and productivity initiatives.
- Given the group’s core business performance above, we still prefer to wait for an overall steadier state. Thus we are keeping our SELL rating and fair value estimate of S$0.96 unchanged.
- Separately, an interim special dividend of 1.35 S-cents/share or S$3.8m has been announced, representing ~45% of the divestment gain from 112 Katong.
Jodie Foo
OCBC Securities
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http://www.ocbcresearch.com/
2016-05-10
OCBC Securities
SGX Stock
Analyst Report
0.96
Same
0.96
