Yeo Hiap Seng - CIMB Research 2016-05-31: Refreshing look, enduring tastes

Yeo Hiap Seng - CIMB Research 2016-05-31: Refreshing look, enduring tastes YEO HIAP SENG LTD Y03.SI 

Yeo Hiap Seng - Refreshing look, enduring tastes

  • A pure F&B player with a strong brand and regional presence.
  • Hidden asset in significant land bank but no immediate development plans.
  • Untapped brand potential. Spending more to expand capacity and modernise its production facilities; will spend more on A&P.
  • Launching new drinks and food-related products.
  • Smallest by market cap among SGX-listed F&B companies but has equally significant regional presence, distribution network and an established brand. 

Why are we highlighting this stock? 

  • YHS returned to its roots as a pure F&B player when it sold its last property unit in 2013. 
  • The Yeo’s brand is well established in South East Asia and the company has a significant distribution network. 
  • With the backing of the Far East Group, YHS is in an ideal position to untap its brand potential. 

Unlocking brand potential 

  • While YHS may have been distracted by its property development business in the past, it certainly made haste to recover lost time and has been spending to modernise its facilities, expand production and make inroads into new countries such as Cambodia and Indonesia. 
  • New drink flavours have been launched and it is also planning to launch other new products. 

Strong balance sheet 

  • The company was in a net cash position in FY14 and FY15 and generated positive net cash from operations. As at end 1Q16, YHS had a net cash position of S$108m (US$80m) and zero debt. 
  • Capex has been high as the group made new investments to upgrade its production facilities. 
  • Funding is not an issue given its strong cash flow generation capability. 

Hidden land assets 

  • Given its long legacy, YHS also sits on a significant land bank that spread across Malaysia, Hong Kong, China and the USA
  • By size, the three largest plots are in Malaysia and consist of farming land and land for industrial use. There are no near-term plans for any property development on these plots of land. 

No plans to go private 

  • The Far East Group and its related entities own 78.97% of YHS, but from our interview with management, we understand that that they have no plans to take YHS private at this juncture. 
  • Staying listed also helps YHS incentivise its staff through its share incentive plan. 


  • YHS has the smallest market cap among the F&B companies under our coverage. It trades at a historical CY15 P/E of 20.2x versus the peer average (excluding YHS) of 25.9x. CY15 P/BV is 1.3x versus peer average of 3.7x while ROE is 6.0% versus peer average of 16.4%. 
  • Dividend yield at 1.5% is also lower than peer average of 2.6%.

William TNG CFA CIMB Securities | http://research.itradecimb.com/ 2016-05-31
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